Statland v. United States

Donald and Iris Statland (plaintiffs) filed a tax return for the 1976 year. The Statlands reported business income from a partnership interest they owned and a carryback of a net operating loss incurred in 1979. Also, the Statlands believed they should have been able to claim, but did not claim, an exemption for a dependent on their 1976 return. In 1992, the Statlands sued the United States government (defendant) in district court, seeking a tax refund and claiming that they had overpaid their 1976 taxes. The basis for the Statlands’ refund suit was that the business income had been overstated and that the Statlands should have been able to claim the exemption. In 1993, the Internal Revenue Service (IRS) redetermined the Statlands’ 1976 tax liability. The IRS determined that the Statlands’ carryback of the 1979 loss was improper. The IRS concluded that the Statlands had underpaid their 1976 tax liability and issued them a notice of deficiency. The Statlands then filed a petition in the United States Tax Court challenging the IRS’s deficiency determination. In the district-court action, the government filed a motion to dismiss the refund suit, arguing that, pursuant to § 7422(e) of the Internal Revenue Code (code), the district court lost jurisdiction when the Statlands filed a Tax Court petition concerning the same subject matter. The district court granted the government’s motion, and the Statlands appealed.