Estate of Mueller v. Comm'r

101 T.C. No. 37, 101 T.C. 551, 1993 U.S. Tax Ct. LEXIS 76

• Court: United States Tax Court
• Decided: December 13, 1993
• Docket: Docket No. 2733-90
• Status: Published

Opinions

OPINION

Beghe, Judge:

In Estate of Mueller v. Commissioner, T.C. Memo. 1992-284, we redetermined the increased value of the shares of Mueller Co. included in decedent’s gross estate. We now consider respondent’s motion to dismiss for lack of jurisdiction the partial affirmative defense of equitable recoupment asserted in petitioner’s amended petition in respect of a time-barred overpayment of income tax by petitioner’s residuary legatee, the Bessie I. Mueller Trust (the trust). For the reasons discussed below, we deny respondent’s motion to dismiss.

Unless otherwise indicated, all section references are to the Internal Revenue Code of 1954, and all Rule references are to the Tax Court Rules of Practice and Procedure.

The ancient doctrine of equitable recoupment, which developed concurrently at common law and in equity, was judicially created to preclude unjust enrichment of a party to a lawsuit and to avoid wasteful multiplicity of litigation. See generally McConnell, “The Doctrine of Recoupment in Federal Taxation”, 28 Va. L. Rev. 577, 579-581 (1942). The doctrine has been applied in Federal tax matters since the Supreme Court’s decision in Bull v. United States, 295 U.S. 247 (1935), to allow the bar of the expired statutory limitation period to be overcome in limited circumstances in order to prevent inequitable windfalls to either taxpayers or the Government that would otherwise result from inconsistent tax treatment of a single transaction, item, or event affecting the same taxpayer or a sufficiently related taxpayer. See also United States v. Dalm, 494 U.S. 596, 605-606 n.5 (1990); Rothensies v. Electric Storage Battery Co., 329 U.S. 296 (1946); Stone v. White, 301 U.S. 532 (1937). The doctrine of equitable recoupment may be applied to relieve inequities caused when a transaction is treated inconsistently under different taxes, such as the income tax and the estate tax. Bull v. United States, supra; Boyle v. United States, 355 F.2d 233 (3d Cir. 1965). However, the party asserting equitable recoupment may not affirmatively collect the time-barred underpayment or overpayment of tax. Equitable recoupment “operates only to reduce a taxpayer’s timely claim for a refund or to reduce the government’s timely claim of deficiency”. O'Brien v. United States, 766 F.2d 1038, 1049 (7th Cir. 1985).

Respondent argues that we are precluded from applying the doctrine of equitable recoupment because there is no provision in the Internal Revenue Code that grants the Tax Court jurisdiction to apply equitable recoupment, and that sections 6214(b)¹ and 6512(b),² and their statutory predecessors, as interpreted and applied by the Supreme Court in Commissioner v. Gooch Milling & Elevator Co., 320 U.S. 418 (1943), expressly deny the Tax Court jurisdiction to apply equitable recoupment.

We disagree with both of these arguments. The absence of an express statutory grant of jurisdiction does not bar us from considering the affirmative defense of equitable recoupment because, as an affirmative defense, it comes within our jurisdiction to redetermine petitioner’s estate tax deficiency. Moreover, neither section 6214(b) or 6512(b) nor Gooch Milling denies us authority to apply equitable recoupment.

Respondent points out that we have consistently adhered to the view that we lack jurisdiction to apply equitable recoupment. See, e.g., Estate of Schneider v. Commissioner, 93 T.C. 568, 570 (1989); Phillips Petroleum Co. v. Commissioner, 92 T.C. 885, 888-890 (1989); Poinier v. Commissioner, 86 T.C. 478, 490-491 (1986), affd. in part and revd. in part 898 F.2d 917 (3d Cir. 1988); Estate of Van Winkle v. Commissioner, 51 T.C. 994, 999-1000 (1969); Vandenberge v. Commissioner, 3 T.C. 321, 327-328 (1944), affd. 147 F.2d 167 (5th Cir. 1945). However, in United States v. Dalm, supra, the Supreme Court adverted to the possibility that the Tax Court could have applied equitable recoupment, but stated that it had “no occasion to pass upon the question whether Dalm could have raised a recoupment claim in the Tax Court,” id. at 611 n.8, because she had not raised the issue in her Tax Court petition. We therefore reconsider the issue in light of Dalm.³

In United States v. Dalm, supra, the taxpayer was administratrix of a decedent’s estate and received fees for her services of $30,000 in 1976 and $7,000 in 1977. The decedent’s sole heir also paid Mrs. Dalm $180,000 in 1976 and $133,813 in 1977, totaling one-third of the net estate, supposedly to carry out the decedent’s intentions. The heir filed a Federal gift tax return for the calendar year 1976, and Mrs. Dalm paid the gift tax on that transfer. Neither the heir nor Mrs. Dalm paid gift tax on the 1977 transfer.

In 1983, after the statutory limitation period had expired on the 1976 gift tax, the IRS determined that the $180,000 and $133,813 transfers to Mrs. Dalm in 1976 and 1977 were additional fees that she should have reported as income on her Federal income tax returns for the taxable years 1976 and 1977, and determined deficiencies in her income taxes for those years. Mrs. Dalm petitioned the Tax Court for a redetermination, arguing that the transfers were gifts excludable from gross income under section 102(a), rather than fees includable as income under section 61(a)(1). However, she did not raise in her Tax Court petition, as required by Rule 39, the affirmative defense of equitable recoupment.⁴

Two days after the trial of the income tax case in this Court, the parties settled. Mrs. Dalm agreed to pay reduced income tax deficiencies for the taxable years 1976 and 1977. Mrs. Dalm then filed an untimely administrative claim for refund of the 1976 gift tax, and thereafter brought suit in U.S. District Court after the IRS had failed to act on the claim within 6 months. The District Court granted summary judgment in favor of the Government and dismissed the case because the recoupment claim was time barred, stating that “no precedent has yet been discovered in which an independent lawsuit, such as this, has been maintained for a year in which the statute of limitations has run.” Dalm v. United States, 89-1 USTC par. 13,806 (D. Mich. 1987). The U.S. Court of Appeals for the Sixth Circuit reversed, holding that the prerequisites for applying equitable recoupment had been satisfied and that the equitable recoupment claim was not an independent lawsuit different from the case in the Tax Court. Dalm v. United States, 867 F.2d 305, 310 (6th Cir. 1989). The Supreme Court granted the Government’s petition for a writ of certiorari. United States v. Dalm, 493 U.S. 807 (1989).

In Dalm the factual requirements for equitable recoupment appear to have been satisfied; a single transaction (the 1976 transfer from the heir to the administratrix) had been subject to double taxation (gift tax and income tax) on the basis of inconsistent factual characterizations and legal theories (as both a gift and compensation). Cf. Commissioner v. Duberstein, 363 U.S. 278 (1960). Nonetheless, the Supreme Court reversed the Court of Appeals’ decision on the ground that a claim for equitable recoupment of time-barred overpaid taxes could not, by itself, provide the jurisdictional basis for a tax refund suit in U.S. District Court. United States v. Dalm, 494 U.S. at 606-608. The Supreme Court stated that its past decisions in Stone v. White, 301 U.S. 532 (1937), and Bull v. United States, 295 U.S. 247 (1935),

stand only for the proposition that a party litigating a tax claim in a timely proceeding may, in that proceeding, seek recoupment of a related, and inconsistent, but now time-barred tax claim relating to the same transaction. * * * [United States v. Dalm, 494 U.S. at 608.]

Inasmuch as Mrs. Dalm was trying to use her recoupment claim offensively to support a separate time-barred claim for refund of overpaid gift tax, the Supreme Court reversed the Court of Appeals for the Sixth Circuit and reinstated the District Court’s decision that it had no jurisdiction to adjudicate the taxpayer’s equitable recoupment claim.

Dissenting in United States v. Dalm, 494 U.S. at 612-623, Justice Stevens disagreed with the majority’s decision on the District Court’s jurisdiction to hear Mrs. Dalm’s claim for refund based on equitable recoupment, but commended the majority’s reservation of the question whether the Tax Court has authority to consider recoupment. Id. at 615 n.3.⁵

Respondent argues that we lack jurisdiction to apply the doctrine of equitable recoupment because there is no provision in the Internal Revenue Code granting us authority to do so. As respondent points out, the Tax Court is a court of limited jurisdiction that derives its authority from the Internal Revenue Code. Sec. 7442. However, exercising jurisdiction over petitioner’s recoupment defense does not require us to exercise jurisdiction that is beyond the scope of petitioner’s main claim for the redetermination of its estate tax deficiency.

Although petitioner is, in actuality, the “plaintiff’ in this suit, it is entitled to raise affirmative defenses to respondent’s deficiency determination, such as res judicata, collateral estoppel, estoppel, waiver, duress, and the statute of limitations. Rule 39; see Woods v. Commissioner, 92 T.C. 776, 784 (1989). In Bull v. United States, 295 U.S. 247, 260 (1935), the Supreme Court recognized that in tax refund cases, “the usual procedure for the recovery of debts is reversed * * *. Payment precedes defense, and the burden of proof, normally on the claimant, is shifted to the taxpayer.” So it is in the Tax Court, where the taxpayer must sue the Commissioner of Internal Revenue to have a deficiency redetermined. As in the refund fora, the taxpayer in the Tax Court has the burden of proof. Rule 142(a); Welch v. Helvering, 290 U.S. 111 (1933). When a taxpayer raises an affirmative defense to a deficiency determination, we need no additional source of jurisdiction to render a decision with respect to the defense. It is part of the entire action over which we have jurisdiction. As we said in Naftel v. Commissioner, 85 T.C. 527, 533 (1985), when a taxpayer petitions this Court for a redeter-mination of a deficiency, we take jurisdiction over the entire tax liability, not just the items determined to be erroneous by the Commissioner in the notice of deficiency. This is a proceeding to redetermine petitioner’s estate tax deficiency, over which we clearly have jurisdiction. Therefore, in deciding this case, we may take into account all facts that bear on petitioner’s deficiency and may apply equitable principles in so doing. Woods v. Commissioner, supra at 784-787.

In Woods v. Commissioner, supra at 784, we listed “numerous instances where we have applied equitable principles in deciding issues over which we had jurisdiction.” These include the equity-based principles of waiver,⁶ duty of consistency (quasi-estoppel),⁷ estoppel,⁸ substantial compliance,⁹ abuse of discretion,¹⁰ laches,¹¹ and the tax benefit rule.¹² In Woods v. Commissioner, supra at 789, we reformed an agreement to extend the statutory period of limitations on assessment by reason of the parties’ mutual mistake in executing a Form 872-A. Thus, in a Tax Court proceeding, either party is free to raise equity-based defenses to the assertions of the other party, including equitable recoupment, and the Court, insofar as it has jurisdiction over the main claim, is free to entertain those defenses. “While we cannot expand our jurisdiction through equitable principles, we can apply equitable principles in the disposition of cases that come within our jurisdiction.” Id. at 784-785 (quoting Berkery v. Commissioner, 90 T.C. 259, 270 (1988) (Hamblen, J., concurring)).

We find affirmative support for our decision today in sections 7422(e), 6512(a), and 7481. Section 7422(e) provides that when a petition is filed in the Tax Court, “the district court or the United States Claims Court, as the case may be, shall lose jurisdiction of taxpayer’s suit [for refund] to whatever extent jurisdiction is acquired by the Tax Court of the subject matter of taxpayer’s suit”. Further, section 6512(a) prohibits taxpayers from bringing suits for refund while simultaneously litigating the same issue in the Tax Court, and section 7481 provides for finality of Tax Court decisions, which have the effects of res judicata and collateral estoppel. Commissioner v. Sunnen, 333 U.S. 591 (1948); Stern v. United States, 563 F. Supp. 484, 487 (D. Nev. 1983). As we said in Woods v. Commissioner, supra at 788, these provisions indicate that "Congress intended the Tax Court to have full judicial authority to resolve issues over which it has jurisdiction”.

The combined effect of these sections is to channel tax litigation in the Tax Court, to make our decisions binding, and to preclude relitigation of the same issues in another forum. See Estate of Ming v. Commissioner, 62 T.C. 519 (1974). This statutory scheme indicates that Congress did not intend to restrict our application of legal and equitable principles to decide matters within our jurisdiction unless it specifically enacted such a limitation. * * * [Id. at 788-789.]

The origin of the view that the Tax Court lacks authority under sections 6214(b) and 6512(b) to apply equitable recoupment can be traced to one of the earliest Board of Tax Appeals decisions applying the doctrine of setoff.¹³ Barry v. Commissioner, 1 B.T.A. 156 (1924). In that case, the Commissioner determined an overassessment of income tax for 1920 and a deficiency for 1921, and proposed that the taxpayer remit the excess of the 1921 deficiency over the 1920 overassessment. The taxpayer petitioned the Board, arguing that he had wrongfully been denied unrelated depreciation deductions for 1920 and 1921, and sought to have the unrelated 1920 overpayment attributable to the disallowed depreciation deductions credited, by way of setoff, against his 1921 deficiency. The Commissioner moved to dismiss the petition on the ground that the Board had no jurisdiction over the taxable year 1920, inasmuch as the Commissioner had not determined a deficiency for that year. The Board of Tax Appeals held that it had jurisdiction over the case and allowed the unrelated 1920 overpayment to offset the 1921 deficiency.

In 1926, Congress enacted section 274(g) of the Revenue Act of 1926, ch. 27, 44 Stat. 56, the statutory predecessor to section 6214(b).¹⁴ This statute provided that in determining an income tax deficiency in respect of any taxable year the Board could consider such facts with respect to the taxes for the other taxable years as might be necessary to redetermine the amount of the deficiency, but in so doing would have no jurisdiction to determine whether the tax for other taxable years had been overpaid or underpaid. Thus, the statute precluded the Board from applying setoff to reduce a taxpayer’s income tax deficiency for the taxable year before it by the amount of an unrelated income tax overpayment for another year, as it had done in Barry v. Commissioner, supra. However, there was nothing in section 274(g) of the Revenue Act of 1926 or its legislative history that indicates that Congress intended to deny the Board the power to apply the doctrine of equitable recoupment, a term not used in the statute, its legislative history, H. Rept. 1, 69th Cong., 1st Sess. 11 (1925), 1939-1 C.B. (Part 2), 315, 322, or the Board’s opinion in Barry v. Commissioner, supra. Moreover, the facts of Barry did not lay the basis for an equitable recoupment defense by the taxpayer; the 1920 overpayment and the 1921 deficiency bore no relationship to each other. Thus, Congress could not have enacted section 274(g) of the 1926 Revenue Act in response to the Board’s exercise of recoupment jurisdiction. However, the Board thereafter interpreted section 274(g), reenacted as section 272(g) of later Revenue Acts and the 1939 Code, in conjunction with section 322(d), I.R.C. 1939,¹⁵ as denying it power to apply either setoff or equitable recoupment in income tax cases. See, e.g., Red Wing Potteries, Inc. v. Commissioner, 43 B.T.A. 841 (1941); Heyl v. Commissioner, 34 B.T.A. 223, 226 (1936); Cornelius Cotton Mills v. Commissioner, 4 B.T.A. 255, 256 (1926); see also Dubroff, The United States Tax Court: An Historical Analysis 484-485 (1979).

Commissioner v. Gooch Milling & Elevator Co., 320 U.S. 418 (1943), presented the question whether the Board had authority to apply equitable recoupment in income tax cases.¹⁶ In Gooch Milling, the Commissioner examined the taxpayer’s books for the taxable year ending June 30, 1935, and determined that it had erroneously overvalued its closing inventory as of that date. This determination affected the opening inventory for the taxable year ending June 30, 1936, and resulted in income and excess profits tax deficiencies for 1936. However, because of the inventory revaluation, the taxpayer’s ending inventory for the taxable year ending June 30, 1935, also changed. As a consequence of the revaluation, the taxpayer had overpaid its 1935 income and excess profits taxes. However, because the statutory limitation period had expired on the 1935 overpayment, the taxpayer could not recover it as a refund. The taxpayer petitioned the Board of Tax Appeals for a redetermination of the 1936 deficiency and, in its amended petition, sought to have the 1935 overpayment applied as an offset against the 1936 deficiency. On the basis of its previous decisions, which had relied on section 274(g) of the Revenue Act of 1926, the Board of Tax Appeals, in a Memorandum Opinion dated December 17, 1941, refused to grant this relief. Commissioner v. Gooch Milling & Elevator Co., supra at 419. The taxpayer appealed the Board’s decision to the U.S. Court of Appeals for the Eighth Circuit, which reversed. Gooch Milling & Elevator Co. v. Commissioner, 133 F.2d 131, 134 (8th Cir. 1943). However, the Supreme Court reversed and held that the Board lacked jurisdiction to allow the 1935 income tax overpayment to be offset against the 1936 income tax deficiency.

Against this background, we interpret Gooch Milling as not preventing the Tax Court from considering the affirmative defense of equitable recoupment when it is properly raised in a timely suit for redetermination of a tax deficiency over which we have jurisdiction. See United States v. Dalm, 494 U.S. 596, 608 (1990). Further support for our holding that we have authority to apply equitable recoupment is that section 6214(b) specifically applies only to income and gift taxes and makes no mention of the estate tax. Because section 6214(b) omits any reference to the estate tax, Commissioner v. Gooch Milling & Elevator Co., supra, is not in point. Contrary to our holding in Estate of Van Winkle v. Commissioner, 51 T.C. 994 (1969), we find nothing in section 62Í4(b) that applies to the estate tax case now before us. As a result, we will no longer follow Estate of Van Winkle or any of our cases denying that we have authority to apply equitable recoupment.

In addition, section 6512(b), formerly section 322(d), I.R.C. 1939, does not preclude us from exercising jurisdiction over petitioner’s equitable recoupment defense. Section 6512(b) simply confers authority, when we decide that a taxpayer has no deficiency but an overpayment of income tax, estate or gift tax, or certain excise taxes, to order the Commissioner to refund the overpayment. Sec. 6512(b)(2). As we explained in Phillips Petroleum Co. v. Commissioner, 92 T.C. 885, 889 (1989), “this Court’s jurisdiction to determine an overpayment parallels its jurisdiction to redetermine a deficiency.” Because this is not a proceeding for the redetermination of the trust’s 1986 income tax deficiency, we cannot exercise section 6512(b) overpayment jurisdiction over the trust. However, this does not mean that we lack authority, in the exercise of our jurisdiction, to redetermine petitioner’s estate tax deficiency by applying the doctrine of equitable recoupment.

Having concluded that we have authority to entertain petitioner’s partial affirmative defense of equitable recoupment, we will deny respondent’s motion to dismiss and order that this case be set for further proceedings.

To reflect the foregoing,

An appropriate order will be issued.

Reviewed by the Court.

Shields, Clapp, Swift, Jacobs, Gerber, Wright, Parr, Wells, Ruwe, Colvin, Halpern, Chiechi, and Laro, JJ., agree with the majority opinion.

1 Sec. 6214(b) provides:

SEC. 6214(b). Jurisdiction Over Other Years and Quarters. — The Tax Court in redetermining a deficiency of income tax for any taxable year or of gift tax for any calendar year or calendar quarter shall consider such facts with relation to the taxes for other years or calendar quarters as may be necessary correctly to redetermine the amount of such deficiency, but in so doing shall have no jurisdiction to determine whether or not the tax for any other year or calendar quarter has been overpaid or underpaid.

2 Sec. 6512(b)(1) provides that 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, 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.

3 See also O’Brien v. United States, 766 F.2d 1038, 1050 n.15 (7th Cir. 1985) (stating that “It is not clear whether the Tax Court currently possesses the equitable jurisdiction necessary to apply the equitable recoupment doctrine.”)*

4 Rule 39 provides that

A party shall set forth in the party’s pleading any matter constituting an avoidance or affirmative defense, including res judicata, collateral estoppel, estoppel, waiver, duress, fraud, and the statute of limitations. A mere denial in a responsive pleading will not be sufficient to raise any such issue.

See Gustafson v. Commissioner, 97 T.C. 85, 89-92 (1991) (if an affirmative defense is not pleaded, it is deemed waived).

5 Justice Stevens noted that the parties had not disputed whether the Tax Court had authority to consider recoupment of the gift tax against the income tax, and, in the footnote, said:

See Rev. Rid. 71-56, 1971-1 Cum. Bull. 404, 405 (“[T]he Tax Court lacks jurisdiction to consider a plea of equitable recoupment”); see also Estate of Schneider v. Commissioner, 93 T.C. 568 (1989). In Rothensies v. Electric Storage Battery Co., 329 U.S. 296, 303 (1946), we cited Commissioner v. Gooch Milling & Elevator Co., 320 U.S. 418 (1943), for the proposition that the Tax Court has no jurisdiction to consider recoupment. A careful reading of the Gooch Milling opinion, and of the relevant statute, however, will show that it actually considered only the question of recoupment based on an overpayment in a year other than the year in dispute. I therefore commend the Court for its careful reservation of the issue, see ante at 611, n.8. It is nevertheless appropriate to assume for purposes of deciding the jurisdictional issue in this case that respondent’s counsel correctly believed that no recoupment could be had in the Tax Court.

Of course, if this Court were eventually to decide the reserved issue by holding that the Tax Court has jurisdiction to hear an equitable recoupment claim, today’s decision would become a dead letter. No taxpayer would have any reason to litigate the deficiency and the recoupment issues separately, and in any event a judgment upon the former would bar a subsequent suit upon the latter under the doctrine of res judicata.

[United States v. Dalm, 494 U.S. 596, 615 n.3 (1990) (Stevens, J., dissenting).]

6 Armco, Inc. v. Commissioner, 88 T.C. 946, 963 n.8 (1987); Aero Rental v. Commissioner, 64 T.C. 331, 338 (1975).

7 Unvert v. Commissioner, 72 T.C. 807, 814-817 (1979), affd. 656 F.2d 483 (9th Cir. 1981); Mayfair Minerals, Inc. v. Commissioner, 56 T.C. 82 (1971), affd. per curiam 456 F.2d 622 (5th Cir. 1972).

8 Boulez v. Commissioner, 76 T.C. 209, 214-217 (1981), affd. 810 F.2d 209 (D.C. Cir. 1987).

9 Taylor v. Commissioner, 67 T.C. 1071, 1077-1078 (1977).

10 Estate of Gardner v. Commissioner, 82 T.C. 989 (1984).

11 Mecom v. Commissioner, 101 T.C. 374 (1993); Southern Pac. Transp. Co. v. Commissioner, 75 T.C. 497, 840 (1980).

12 Rojas v. Commissioner, 90 T.C. 1090 (1988), affd. 901 F.2d 810 (9th Cir. 1990); see also Hillsboro Natl. Bank v. Commissioner, 460 U.S. 370 (1983).

13 On the differences between setoff and equitable recoupment, see Dysart v. United States, 169 Ct. Cl. 276, 281-282, 340 F.2d 624, 627-629 (1965); Saltzman, IRS Practice and Procedure, par. 5.06[1] and [2], at 5-41 (2d ed. 1991 & Supp. No. 2 1993); Andrews, “Modern-Day Equitable Recoupment and the ‘Two Tax Effect:’ Avoidance of the Statutes of Limitation in Federal Tax Controversies”, 28 Ariz. L. Rev. 595, 615-619 (1986).

14 Reenacted in later Revenue Acts as sec. 272(g), and then codified as such in the Internal Revenue Code of 1939, and later as sec. 6214(b) of the Internal Revenue Codes of 1954 and 1986.

15 Sec. 322(d), I.R.C. 1939, was the statutory predecessor to sec. 6512(b). See supra note 2.

16 In 1938, Congress enacted the statutory mitigation provisions, currently secs. 1311-1314, to allow correction of inconsistent positions that otherwise would be barred by expiration of the statutory limitation period. Revenue Act of 1938, ch. 289, tit. V, sec. 820, 52 Stat. 447, 581, later codified as sec. 3801, I.R.C. 1939. The mitigation provisions were made retroactive to taxable years beginning Jan. 1, 1932, Revenue Act of 1938, ch. 289, tit. V, sec. 820(f), 52 Stat. 582, and ultimately provided relief to the taxpayer in Gooch Milling & Elevator Co. v. United States, 111 Ct. Cl. 576, 78 F. Supp. 94, 97 (1948).

The legislative history of the mitigation provisions makes clear that when they do not operate to allow a party to obtain relief from inconsistent tax treatment, the courts are free to resort to judicial doctrines, including equitable recoupment, to correct errors resulting from inconsistent tax treatment. S. Rept. 1567, 75th Cong., 3d Sess. (1938), 1939-1 C.B. (Part 2) 779, 814-817; see Woods v. Commissioner, 92 T.C. 776, 786 (1989).