In a case of first impression, the court upheld the IRS denial of a refund even though the tax return was filed within 3 years of the due date. Tax payments for 2012 were deemed to have been made 4/15/13 the original due date of the 2012 return. T/P had requested a 6 month extension but did not file a tax return. IRS issued a deficiency notice on 6/19/15 for tax year 2012. T/P filed a tax return on 8/29/15 requesting a refund. IRS agreed to the tax liability but denied the refund because of this line in IRC Sec. 6512(b)(3):
"In a case described in subparagraph (B) where the date of the mailing of the notice of deficiency is during the third year after the due date (with extensions) for filing the return of tax and no return was filed before such date, the applicable period under subsections (a) and (b)(2) of section 6511 shall be 3 years."
The court agreed that because the deficiency letter was mailed in the second year, the 3 year rule for the late filed return was not applicable. Only the 2 year rule (two years from date of payment) was applicable. Aug. 29, 2015 was more than 2 years from the date of payment.
Please read the decision for more details. Borenstein vs Commissioner: