Rev. Rul. 54-469

Advice is requested whether a valid claim for credit or refund of an overpayment of tax was filed within the statutory period prescribed by section 322(b) of the Internal Revenue Code of 1939 under the circumstances described below.

For the year 1947 the taxpayer filed a timely return on Form 1040 which reflected an overpayment of tax. He elected in such return to claim credit for the overpayment against estimated tax for the year 1948 but failed to take credit for the amount so claimed on his return timely filed for the year 1948. The credit was allowed but the taxpayer was not notified of its allowance.

Section 322 of the Internal Revenue Code, in providing for credits and refunds of overpayments of Federal taxes paid, reads in part as follows:

(b) LIMITATIONS ON ALLOWANCE.-

(1) PERIOD OF LIMITATION.-Unless a claim for credit or refund is filed by the taxpayer within three years from the time the return was filed by the taxpayer or within two years from the time the tax was paid, no credit or refund shall be allowed or made after the expiration of whichever of such periods expires the later. * * *

Section 39.322-3 of Regulations 118 provides that a properly executed return on Form 1040 shall, at the election of the taxpayer, constitute a claim for refund or credit within the meaning of section 322 for the amount of the overpayment disclosed by such return. For the purpose of section 322, such claim shall be considered as filed on the date on which such return is considered as filed. An election to treat the return as a claim for refund or credit shall be evidenced by a statement on the return setting forth the amount determined as an overpayment and advising whether such amount shall be refunded or shall be applied as a credit against the taxpayer's estimated tax for the taxable year immediately succeeding the taxable year for which such return is filed.

It is the position of the Internal Revenue Service that unless it can be shown that the overpayment in the prior year tax claimed a credit has been both allowed as a credit against the tax for the year immediately succeeding and the taxpayer notified of such allowance so that his remedy, if any, lies in the recovery of a refund for that year, the overpayment referred to still constitutes an overpayment of tax for the prior taxable year, with respect to which an adequate claim was filed within the meaning of the regulations at the time the completed return was filed for that year.

In the present case the taxpayer failed to take credit for the overpayment in his return for 1948. Since the taxpayer was not notified that the amount claimed as a credit was allowed, the overpayment will be allowable on the basis of the claim contained in his return made for the year 1947.

Accordingly, it is held that where an individual, upon a properly executed Federal income tax return, claims an overpayment of his current year's Federal income tax and properly elects upon that return to have the credit applied against his succeeding year's estimated tax liability but the claimed overpayment is not both actually credited against the taxpayer's tax liability for the succeeding taxable year and the taxpayer notified that the amount has been credited, then the overpayment disclosed upon the current year's return constitutes an overpayment of tax for that year with respect to which an adequate claim was filed at the time of the filing of the return.