                       T.C. Memo. 2002-303



                     UNITED STATES TAX COURT



 W. AUGUST HILLENBRAND AND NANCY K. HILLENBRAND, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5923-99.                 Filed December 12, 2002.


     Larry J. Stroble and Jennifer A. Seymour, for petitioners.

     Stewart Todd Hittinger, for respondent.



                       MEMORANDUM OPINION


     WELLS, Chief Judge:   Respondent determined deficiencies in

petitioners’ gift taxes as follows:

     Year      W. August Hillenbrand     Nancy K. Hillenbrand

     1993            $124,613                  $120,082
     1994              19,019                    18,329
     1995              56,085                    55,838

       The issue to be decided is whether the Court has

jurisdiction to decide whether the deficiencies for the years in
                               - 2 -

issue have been paid, where, in response to the notices of

deficiency, petitioners sent the Internal Revenue Service

remittances and directed that the remittances be applied to the

deficiencies in issue, and, subsequently, respondent made an

erroneous nonrebate refund of those remittances to petitioners.

All section references are to the Internal Revenue Code, as

amended, and all Rule references are to the Tax Court Rules of

Practice and Procedure.

                            Background

     The parties submitted the instant case fully stipulated,

without trial, pursuant to Rule 122.     The parties’ stipulations

of facts are hereby incorporated in this opinion by this

reference and are found as facts in the instant case.

     Petitioners W. August Hillenbrand and Nancy K. Hillenbrand

are husband and wife.   When the petition was filed, they were

residents of Batesville, Indiana.   During the years in issue,

petitioner W. August Hillenbrand was the chief executive officer

of Hillenbrand Industries, Inc.

     During 1993, 1994, and 1995, petitioners made substantial

gifts to their children and son-in-law.    In 1993, 1994, and 1995,

petitioners also made contributions to trusts commonly referred

to as “Grantor Retained Annuity Trusts” (GRATs).    Petitioners

each filed Federal gift tax returns for 1993, 1994, and 1995.
                                 - 3 -

     Respondent examined petitioners’ 1993, 1994, 1995, and 19961

Federal gift tax returns.     For the same periods, respondent also

examined the gift tax returns of petitioners’ children and son-

in-law.     Petitioners’ gifts to their children and son-in-law were

of Hillenbrand Industries stock, interests in a limited

partnership, and remainder interests in certain so-called GRATs.

     On September 15, 1998, petitioners’ attorney, Larry J.

Stroble, sent respondent a letter accompanied by six checks

remitted by petitioners, William A. Hillenbrand II, Theresa A.

Hartmann, Katherine K. Crowther, Richard D. Hillenbrand II, and

Martha L. Tuveson.     The letter, dated September 15, 1998,

accompanying the six checks, stated:

          Enclosed are various checks which are to be
     considered deposits in the nature of cash bonds in
     accordance with Rev. Proc. 84-58. The checks are cash
     bonds related to the tax deficiency and interest
     asserted by the Internal Revenue Service in connection
     with gift tax examinations of the taxpayers for the
     years reflected below, and are intended to halt the
     accrual of interest on such tax deficiencies and
     previously accrued interest.

         The six checks totaled $1,457,460.   The check remitted on

behalf of petitioners was in the amount of $1,242,082, or

$621,041 on behalf of each petitioner.     Petitioners intended the

check to cover their 1993, 1994, 1995, and 1996 Federal gift tax

years, as explained in the letter accompanying the check.


     1
      Petitioners’ 1996 Federal gift tax year is not before this
Court in the instant case.
                               - 4 -

     On November 23, 1998, petitioners and respondent agreed upon

certain audit adjustments regarding petitioners’ 1993, 1994,

1995, and 1996 Federal gift tax years, except for the issue of

whether the spousal interests provided for in the GRATs were

qualified interests within the meaning of section 2702 for

petitioners’ 1993, 1994, and 1995 Federal gift tax years (the

GRAT issues).

     On December 4, 1998, respondent made assessments against

petitioners relating to the November 23, 1998, agreement covering

the adjustments other than those relating to the GRAT issues.

Respondent assessed $411,682.46 in Federal gift taxes against

petitioner W. August Hillenbrand’s $621,041 deposit, and, on

January 4, 1999, sent him an unsolicited refund of $209,358.54.

Respondent assessed $387,078.19 in Federal gift taxes against

petitioner Nancy K. Hillenbrand’s deposit of $621,041, and, on

January 4, 1999, sent her an unsolicited refund of $233,358.54

(the foregoing two checks are collectively hereinafter sometimes

referred to as the January 4, 1999, refunds).   The January 4,

1999, refunds were not related to the GRAT issues.

      Respondent and petitioners continued to disagree, however,

about the amount of Federal gift taxes due regarding the GRAT

issues.   On December 30, 1998, respondent mailed six notices of

deficiency to petitioners covering the GRAT issues.   On February

12, 1999, in response to the six notices of deficiency,
                              - 5 -

petitioners’ attorney sent respondent six checks.2    Accompanying

the checks was a letter, dated February 12, 1999, which stated,

in part:

          If it has not already occurred, we request that
     the Service apply the cash bonds previously posted on
     behalf of Mr. and Mrs. Hillenbrand for 1993, 1994, and
     1995 to the tax deficiencies for those years, and we
     request that the enclosed checks be applied as
     additional payments with respect to those deficiencies.

     The February 12, 1999, letter further indicated the

following allocations of the funds represented by the checks

enclosed with the February 12, 1999, letter:   As to petitioner W.

August Hillenbrand, $187,957 should be applied to 1993, $26,531

should be applied to 1994, and $71,035 should be applied to 1995;

as to petitioner Nancy K. Hillenbrand, $180,949 should be applied

to 1993, $24,466 should be applied to 1994, and $70,718 should be

applied to 1995.

     The foregoing specific allocations were further reflected on

the lower left-hand side on the face of each of the six checks

enclosed with the February 12, 1999, letter.   Each check

identified the specific individual and tax year.     Check No. 4405,

for $187,957, is marked “1993 W August Hillenbrand”.    Check No.

4406, for $26,531, is marked “1994 W August Hillenbrand”.    Check

No. 4407, for $71,035, is marked “1995 W August Hillenbrand”.


     2
      These six checks were different from the six checks
remitted to respondent by petitioners and their children on Sept.
15, 1998.
                                - 6 -

Check No. 4408, for $180,949, is marked “1993 Nancy K.

Hillenbrand”.   Check No. 4409, for $24,466, is marked “1994 Nancy

K. Hillenbrand”.   Check No. 4410, for $70,718, is marked “1995

Nancy K. Hillenbrand”.    All checks were drawn on the same account

at Bank One, Indianapolis, N.A. (the foregoing six checks are

collectively hereinafter sometimes referred to as the February

12, 1999, remittances).

     Respondent did not post the February 12, 1999, remittances

to the years designated by petitioners; i.e., petitioners’ 1993,

1994, and 1995 Federal gift tax years.   Rather, in error,

respondent posted the February 12, 1999, remittances to

petitioners’ 1998 Federal gift tax year, as reflected on

respondent’s accounts for petitioners’ 1998 Federal gift taxes

(respondent refers to these accounts as module accounts, and

hereinafter those accounts will be referred to as module

accounts).   Respondent never issued a notice of deficiency for

petitioners’ 1998 Federal gift tax year, and there is no

indication in the record that petitioners were liable for any

Federal gift taxes for 1998 or that such liabilities were ever

contemplated by either party.

     Respondent’s internally generated module accounts for

petitioners’ 1998 Federal gift tax year were consistent in

amounts with the February 12, 1999, remittances that were

designated for petitioners’ 1993, 1994, and 1995 Federal gift tax
                                 - 7 -

years.    Respondent’s 1998 Federal gift tax module account for

petitioner W. August Hillenbrand indicates that there were three

“subsequent payments” made on February 16, 1999, of $26,531,

$187,957, and $71,035.    Similarly, respondent’s 1998 Federal gift

tax module account for petitioner Nancy K. Hillenbrand indicates

that there were three “subsequent payments” made on February 16,

1999, of $24,466, $180,949, and $70,718.

     In their petition, petitioners contested respondent’s

determinations in the notices of deficiency relating to the GRAT

issues.    Respondent’s determinations adjusted the valuation of

the GRATs under section 2702.    Respondent and petitioners

conceded that the substantive issue regarding the GRAT issues

would be decided by a case before this Court, Cook v.

Commissioner, 115 T.C. 15 (2000), affd. 269 F.3d 854 (7th Cir.

2001), which was subsequently decided in favor of the

Commissioner.    Accordingly, petitioners concede that respondent’s

determined deficiencies, as stated in the notices of deficiency

issued on December 30, 1998, reflect the correct deficiencies in

the instant case.

      On May 31, 1999, respondent erroneously refunded $287,827

to petitioner W. August Hillenbrand, consisting of a $285,523

refund and $2,304 in interest.    Similarly, on June 7, 1999,

respondent erroneously refunded $278,788 to petitioner Nancy K.

Hillenbrand, consisting of a refund of $276,133 and $2,655 in
                               - 8 -

interest.   The parties have stipulated that the May 31, 1999,

refund to petitioner W. August Hillenbrand and the June 7, 1999,

refund to petitioner Nancy K. Hillenbrand are erroneous nonrebate

refunds (hereinafter the erroneous refunds).   The erroneous

refunds were made with respect to petitioners’ 1998 Federal gift

tax module accounts, which were the same module accounts to which

respondent posted petitioners’ February 12, 1999, remittances.

Petitioners neither solicited the refunds nor recognized that the

erroneous refunds represented the agreed-upon amounts, plus

interest, sent to respondent in the February 12, 1999,

remittances.

     Subsequent correspondence between respondent and

petitioners’ counsel revealed that respondent believed that

petitioners still owed the deficiencies determined in the

December 30, 1998, notices of deficiency, even after petitioners

sent respondent the February 12, 1999, remittances.   On November

21, 2001, respondent informed petitioners’ counsel that

respondent had made the January 4, 1999, refunds, and that

petitioners were still liable for the deficiencies determined on

December 30, 1998.

     On December 3, 2001, petitioners’ counsel informed

respondent that petitioners sent the February 12, 1999,

remittances to cover the deficiencies determined in the December

30, 1998, notices of deficiency.   In the December 3, 2001,
                                - 9 -

letter, petitioners’ counsel informed respondent that petitioners

had received the January 4, 1999, refunds but had also sent the

February 12, 1999, remittances to respondent to stop the running

of interest and pay all outstanding liabilities and interest.

Sometime after December 3, 2001, the date of petitioners’

counsel’s letter, respondent discovered that the erroneous

refunds had been made.   Before the discovery of the erroneous

refunds after that date, neither counsel for petitioners nor for

respondent were aware that the erroneous refunds had been sent to

petitioners.

                            Discussion

     The parties have stipulated that Cook v. Commissioner,

supra, resolves the substantive issue of petitioners’ Federal

gift tax liability in the instant case.   The parties are bound to

that stipulation.   Blonien v. Commissioner, 118 T.C. 541 (2002);

see Niedringhaus v. Commissioner, 99 T.C. 202 (1992).     The only

issue we must decide is whether we have jurisdiction to decide

whether the February 12, 1999, remittances paid the deficiencies

in issue in the instant case.

     The United States Tax Court is a court of limited

jurisdiction, in that this Court possesses only adjudicatory

powers that Congress has conferred upon it.   Naftel v.

Commissioner, 85 T.C. 527 (1985); see Euramco Associates, Inc. v.

Commissioner, T.C. Memo. 1991-39, affd. sub nom. Albert J.
                                   - 10 -

Petrulis, D.D.S., S.C. v. Commissioner, 938 F.2d 78 (7th Cir.

1991).   That adjudicatory power encompasses the redetermination

of deficiencies and the determination of overpayments.      Secs.

6214(a), 6512(a).     Moreover, we have jurisdiction only for

taxable years properly before us.       Sec. 6214(b); see Hill v.

Commissioner, 95 T.C. 437 (1990).

     Petitioners initiated the instant case in response to

respondent’s determination of deficiencies in the notices sent to

petitioners.    Accordingly, we may decide the issue of whether the

February 12, 1999, remittances paid the deficiencies only if the

issue properly comes within our deficiency jurisdiction under

section 6214(a) or our overpayment jurisdiction under section

6512(a).   We hold that this Court lacks jurisdiction to decide

the issue.

     For purposes of section 6214, deficiencies are defined by

section 6211.     Section 6211 defines a deficiency as follows:

     SEC. 6211.    DEFINITION OF A DEFICIENCY.

          (a) In General.-–For purposes of this title in the
     case of income, estate, and gift taxes imposed by
     subtitles A and B and excise taxes imposed by chapters
     41, 42, 43, and 44 the term “deficiency” means the
     amount by which the tax imposed by subtitle A or B, or
     chapter 41, 42, 43, or 44 exceeds the excess of–-

                  (1) the sum of

                       (A) the amount shown as the
                  tax by the taxpayer upon his
                                - 11 -

                  return, if a return was made by the
                  taxpayer and an amount was shown as
                  the tax by the taxpayer thereon,
                  plus

                       (B) the amounts previously
                  assessed (or collected without
                  assessment) as a deficiency, over–-

               (2) the amount of rebates, as defined in
          subsection (b)(2), made.

     In other words, the deficiency is the correct tax, minus the

tax shown on the return, minus prior assessments (or collections

without assessment), plus rebates.       Sec. 6211(a); see Interlake

Corp. v. Commissioner, 112 T.C. 103, 110 n.6 (1999).       We have

said that “it is not the existence of a deficiency but the

Commissioner’s determination of a deficiency that provides a

predicate for Tax Court jurisdiction.”       Hannan v. Commissioner,

52 T.C. 787, 791 (1969); see Logan v. Commissioner, 86 T.C. 1222

(1986).   Payments are not included in determining or

redetermining a deficiency, simply because they do not fit within

the definition of a deficiency.    Sec. 6211(a); see Malachinski v.

Commissioner, T.C. Memo. 1999-182, affd. 268 F.3d 497 (7th Cir.

2001); see also Savage v. Commissioner, 112 T.C. 46 (1999); Logan

v. Commissioner, supra at 1227-1230; Clarke v. Commissioner, T.C.

Memo. 1999-199.

     Petitioners contend that the February 12, 1999, remittances

should be treated as amounts “collected without assessment” for

purposes of section 6211(a)(1)(B).       However, it is well
                                - 12 -

established that “collected without assessment” applies to

payments made before the Commissioner issues a notice of

deficiency.   Crawford v. Commissioner, 46 T.C. 262 (1966); see

Bendheim v. Commissioner, 214 F.2d 26, 28 (2d Cir. 1954), affg.

T.C. Memo. 1953-226; see also McConkey v. Commissioner, 199 F.2d

892, 894 (5th Cir. 1952) (applying section 271(a) of the 1939

Internal Revenue Code, a predecessor of section 6211(a)); Walsh

v. Commissioner, 21 T.C. 1063, 1067 (1954); Anderson v.

Commissioner, 11 T.C. 841, 843 (1948).       In those cases, this

Court lacked jurisdiction to redetermine a deficiency because the

“deficiency” had been satisfied by funds “collected without

assessment” before the Commissioner sent the taxpayer a notice of

deficiency.   Crawford v. Commissioner, supra; see Bendheim v.

Commissioner, supra.    Moreover, section 6213(b)(4)3 provides that


     3
      Sec. 6213(b)(4) provides:

          SEC. 6213(b).    Exceptions to Restriction on
     Assessment.--

               *    *       *     *      *       *     *

               (4) Assessment of amount paid.--Any
          amount paid as a tax or in respect of a tax
          may be assessed upon the receipt of such
          payment notwithstanding the provisions of
          subsection(a). In any case where such amount
          is paid after the mailing of a notice of
          deficiency under section 6212, such payment
          shall not deprive the Tax Court of
          jurisdiction over such deficiency determined
          under section 6211 without regard to such
                                                    (continued...)
                               - 13 -

payments made to this Court after the notice of deficiency will

not deprive this Court of jurisdiction to redetermine taxpayers’

deficiencies.    In other words, section 6213(b)(4) permits the

assessment of a payment made by a taxpayer in response to a

notice of deficiency, but such a payment does not deprive this

Court of jurisdiction over the deficiency as determined under

section 6211 without regard to the assessment.    Accordingly, the

February 12, 1999, remittances,4 made after the December 30,

1998, notices of deficiency, were not “amounts previously

assessed (or collected without assessment) as a deficiency” and

thus are not subtracted from the deficiency to be adjudicated by

our decision.5


     3
      (...continued)
          assessment. [Emphasis added.]
     4
      Petitioners contend that Rev. Proc. 84-58, 1984-2 C.B. 501,
would treat the Feb. 12, 1999, remittances as “payments” of tax.
Respondent contends that Rev. Proc. 84-58 does not bind
respondent in the instant case. While we do not decide this
issue because we hold that we lack jurisdiction to decide it, in
that regard, see Rauenhorst v. Commissioner, 119 T.C. 157 (2002),
(Commissioner is bound to positions stated in Commissioner's
published guidance).
     5
      Petitioners contend that the Feb. 12, 1999, remittances
extinguished their tax liability, and they cite a number of cases
in support of this proposition, including: Clark v. United
States, 63 F.3d 83 (1st Cir. 1995); United States v. Wilkes, 946
F.2d 1143 (5th Cir. 1991); and Rodriguez v. United States, 629 F.
Supp. 333 (N.D. Ill. 1986). Those cases state that when a
“taxpayer tenders payment on an assessment, that payment
extinguishes the assessment to the extent of the payment.” Clark
v. United States, supra at 87; see O’Bryant v. Commissioner, 49
                                                   (continued...)
                              - 14 -

     Petitioners and respondent agree that the erroneous refunds

are nonrebate erroneous refunds because they were not created by

respondent’s substantive recalculation of petitioners’ Federal

gift tax liability; the erroneous refunds arose because of

respondent’s mistake or error.   See O’Bryant v. United States, 49

F.3d 340 (7th Cir. 1995).   Because the refunds are considered

nonrebate erroneous refunds, they do not enter into the

determination of deficiencies in petitioners’ Federal gift taxes

for 1993, 1994, and 1995.   Sec. 6211(a) and (b); see O’Bryant v.

United States, supra; see also Interlake Corp. v. Commissioner,

supra.

     As we stated above, our statutory authorization to decide

tax liabilities extends not only to deficiencies under section

6214(a) but also to overpayments (subject to specific limitations

not relevant here).   Sec. 6512(b)(1).6


     5
      (...continued)
F.3d 340 (7th Cir. 1995). Those cases are distinguishable from
the instant case in that they arose in Federal District Court and
under circumstances where the taxpayers had paid their taxes and
were seeking a refund. Thus, in those cases, the Commissioner
had made a final assessment.
     6
      Sec. 6512 provides in part:

     SEC. 6512.   LIMITATIONS IN CASE OF PETITION TO TAX COURT.

          (b) Overpayment Determined by Tax Court.--

               (1) Jurisdiction to determine.--Except
          as provided by paragraph(3) and by section
                                                   (continued...)
                              - 15 -

Petitioners do not assert that the differences between the

February 12, 1999, remittances and the deficiencies in issue

constitute overpayments for petitioners’ 1993, 1994, and 1995

Federal gift tax years.   Indeed, petitioners contend that no

overpayments exist in the instant case.   We treat as a concession

the contention that the February 12, 1999, remittances did not

create any overpayment in petitioners’ Federal gift tax for the

years in issue.   See Schladweiler v. Commissioner, T.C. Memo.

2000-351, n.3, affd. 28 Fed. Appx. 602 (8th Cir. 2002); see Wynn

v. Commissioner, T.C. Memo. 1996-415, n.11.


     6
      (...continued)
          7463, if the Tax Court finds that there is no
          deficiency and further finds that the
          taxpayer has made an overpayment of income
          tax for the same taxable year, of gift tax
          for the same calendar year or calendar
          quarter, of estate tax in respect of the
          taxable estate of the same decedent, or of
          tax imposed by chapter 41, 42, 43, or 44 with
          respect to any act (or failure to act) to
          which such petition relates for the same
          taxable period, in respect of which the
          Secretary determined the deficiency, or finds
          that there is a deficiency but that the
          taxpayer has made an overpayment of such tax,
          the Tax Court shall have jurisdiction to
          determine the amount of such overpayment, and
          such amount shall, when the decision of the
          Tax Court has become final, be credited or
          refunded to the taxpayer. If a notice of
          appeal in respect of the decision of the Tax
          Court is filed under section 7483, the
          Secretary is authorized to refund or credit
          the overpayment determined by the Tax Court
          to the extent the overpayment is not
          contested on appeal.
                               - 16 -

     If petitioners had contended that an overpayment exists in

the instant case due to the February 12, 1999, remittances, this

Court would have jurisdiction to decide whether they should be

treated as payments of the deficiencies in issue.    Sec.

6512(b)(1); see Naftel v. Commissioner, 85 T.C. 527 (1985); see

also Baumgardner v. Commissioner, 85 T.C. 445 (1985); Keefe v.

Commissioner, 15 T.C. 947 (1950).    Thus our overpayment

jurisdiction is not invoked.

     On the basis of the foregoing, we will enter a decision for

respondent with respect to the deficiencies in issue without any

statement as to whether those deficiencies have been paid.7

     We have considered all of the contentions of the parties

that are not discussed herein, and we find them to be without

merit, irrelevant, or moot.

     To reflect the foregoing,


                                      Decision will be entered

                                 for respondent.




     7
      We note that this Court might have jurisdiction under secs.
6320 and 6330 to decide whether the Feb. 12, 1999, remittances
paid the deficiencies in issue, but that jurisdiction has not
been invoked in the instant case.
