Fisher v. United States

Over several years, the Fishers (plaintiffs) engaged in a series of commodities transactions on the London Metals Exchange. With respect to those transactions, the Fishers reported ordinary losses on their 1976 tax return and capital gains on their 1977 and 1978 tax returns. The Internal Revenue Service (IRS) began an investigation of the transactions and secured voluntary consents from the Fishers to extend the statute of limitations to reassess their tax liabilities for 1976 and 1977. In 1981, the IRS determined that the series of transactions was a sham that, for tax purposes, should be treated as a single, unified transaction. Consistent with this characterization, the IRS sent the Fishers a notice that it was assessing a deficiency on their 1976 taxes and an overassessment (that is, a determination that the Fishers over-reported income) on their 1977 and 1978 taxes. In March 1982, the Fishers filed a petition with the United States Tax Court challenging the deficiency on their 1976 taxes. In their petition, the Fishers included as attachments the IRS notices of overassessment for the 1977 and 1978 tax years. Because the years-long series of transactions had to be treated as a single transaction for tax purposes, the validity of the overassessments and the availability of accompanying refunds depended on the outcome of the Tax Court case. The statute of limitations for the Fishers to claim refunds for 1977 and 1978 expired in June 1982 and October 1982, respectively. In December 1982, the Fishers sued the government (defendant) in district court for refunds on their 1977 and 1978 taxes. The government filed a motion to dismiss, arguing that the Fishers’ suit was barred by the statute of limitations. The Fishers argued that the suit was not time-barred because they had made informal claims for refunds for 1977 and 1978 when they filed their Tax Court petition in March.