The Evilness Of Section 6511

Last week, in Borenstein v. Commmissioner, 149 T.C. No. 10 (Aug. 30, 2017), the Tax Court was asked to apply Section 6511 contrary to its very, very intricate terms.  The Court declined to do so.  That meant that a taxpayer lost out on a $30k+ refund.   Ms. B. had paid about $112k in taxes by the due date of her 2012 return (April 15, 2013), but she did not file the return.  While she did get the 6 month extension she still failed to file a return by October 15, 2013.  The months went by — 22 of them— before the Service was kind enough in June 2015 to send her an NOD but was unkind in slamming her with an asserted $1.2m deficiency.   You know that drill.  Ms. B. then quick-like-a-bunny filed a return that September, showing a $79k liability.  The Service said "oh, ok, that's good" and accepted her return as accurate.  So she now only needed to get her refund, right?  Wrong.  See below the fold for why.

Unhappily for her the 6511(b) lookback period is triggered by an NOD because it treats the NOD as a hypothetical claim for refund.  The reason that was unhappy was at the time of the NOD the two years did not stretch back to April 15, 2013.  If she had just filed her return before the NOD, then 6511(b) would allow recovery of payments made up to three years prior which would have reached back to the April 2013 payments.