Refund Claims Involving Loss Carrybacks Include Computational Adjustments in Earlier Years

Published Categorized as Tax Procedure, Tax Returns
Irs Tax Lien Did Not Attach To Trust Property
Irs Tax Lien Did Not Attach To Trust Property

In Stein, LLC, v. United States, No. 2:13-03224, the United States District Court for the Western District of Louisiana addressed the question of whether refund claims stemming from loss carrybacks include computational adjustments in the carryback years. This type of issue often comes up when closing out IRS audits, which is evidenced by this case and the government’s arguments in the case.

Facts & Procedural History

The IRS issued a Notice of Deficiency to Stine in the amount of $2,164,486 on June 20, 2013 for tax year 2008.

Stein filed refund claims stemming from 2008 Go Zone deductions that were not included in its Federal income tax return for 2008, which created loss carrybacks to tax years 2003, 2004, 2005, 2006 and 2007.

The IRS issued a Notice of Disallowance in the amount of $2,450,861 to Stein on December 10, 2013.

Stein filed suit seeking a tax refund for tax years 2003 through 2008.

The court entered a judgment in favor of Stine in the amount of $2,164,486, which was the amount of the 2008 depreciation deduction.

The IRS issued a check to Stein in the amount of $2,164,486.

Stein asked the court to correct its judgement to reflect a $2,450,861 refund, rather than a 2,164,482 refund, as the loss carryback resulted in additional tax savings in the carryback years due to computational issues.

Federal Rule of Civil Procedure article 60(a) says that: “The court may correct a clerical mistake or a mistake arising from oversight or omission whenever one is found in a judgment, order or other part of the record. The court may do so on motion or on its own, with or without notice.”

The government argued that:

Stine’s motion to correct the judgment is an attempt to rewrite its complaint and motion for summary judgment to include claims for a refund of additional credits not litigated before this court. The government asks the court to deny the motion because (1) it is not a proper Rule 60(a) motion; (2) Stine’s claims for additional refunds were not litigated and not before the Court; (3) Stine did not meet its burden of proof that it is entitled to additional funds; and (4) Stine’s claims for 2003-2008 have been finally adjudicated.

The court concluded that there was a mistake or inadvertent error in its judgment because it did not include the total amount of disallowed deductions (2008 Go Zone deductions) and the claims for years 2003 through 2007 predicated upon the loss carryback for the 2008 taxable year.

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