Full opinion text
MEMORANDUM OPINION AND ORDER HURLEY, District Judge. Pending before the Court in this action for recovery of federal income tax, interest, penalties and additions to tax assessed by the Defendant United States [hereinafter “IRS”] against taxpayer husband and wife Plaintiffs Daniel and Ingrid Carroll is (1) the IRS’s motion, made pursuant to Rules 12(b)(1), 12(b)(6), and 56(c) of the Federal Rules of Civil Procedure, for an order dismissing the Complaint for lack of subject matter jurisdiction and failure to state a claim upon which relief may be granted, or alternatively, for summary judgment, (U.S.’ Mot. Dismiss Alt. Summ. J.); (2) the Plaintiffs’ cross-motion, made pursuant to Rule 15(d), to file a supplemental complaint, (Pis.’ Notice Cross-Mot.); and (3) the IRS’s motion, made pursuant to Local Civil Rule 6.3, for reconsideration of this Court’s Memorandum and Order, dated October 23, 2000, see Carroll v. United States, No. CV 98-5740, 2000 WL 1819419 (E.D.N.Y. Oct.23, 2000) [hereinafter “Carroll //”], that had (a) granted Plaintiffs’ motion, made pursuant to Federal Rule of Civil Procedure 56(a), for partial summary judgment with respect to their claim for refund of certain penalties assessed against them by the IRS, and (b) granted Plaintiffs’ motion, made pursuant to Local Civil Rule 6.3, for reconsideration of this Court’s Memorandum and Order, dated October 19, 1999, see Carroll v. United States, No. CV 98-5740, 1999 WL 1090814 (E.D.N.Y. Oct.19, 1999) [hereinafter “Carroll /”], that had originally denied Plaintiffs’ Rule 56(a) motion. (U.S.’ Notice Mot. Recons.) I. BACKGROUND The legal framework underlying the instant motions is complex, involving the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”), Pub.L. No. 97-248, 96 Stat. 324 (1982). The factual history in this case — involving 1995 tax assessments related to Plaintiffs’ 1982 tax liabilities arising from an investment in a plastics recycling limited partnership, after proceedings in both the United States District Court for the Middle District of Florida and the United States Tax Court — is likewise complex. Therefore the Court sets forth in some detail the legal and factual background precipitating this litigation. A. TEFRA’S Statutory Framework Prior to the enactment of TEFRA, partnerships generally were not taxable entities under the Internal Revenue Code. See Chimblo v. Commissioner, 177 F.3d 119, 121 (2d Cir.1999). Typically, the income and expenses of the partnership would “flow through” to the partners and be taxed at the individual partner level. See Transpac Drilling Venture v. Commissioner, 147 F.3d 221, 223 (2d Cir.1998). However, that statutory setup “proved inefficient and often led to inconsistent results” as between different partners who could separately challenge the taxation of their partnership income, sometimes with different results. See Monti v. United States, 223 F.3d 76, 78 (2d Cir.2000) [hereinafter Monti II]. Congress enacted TEFRA in 1982 to “ensure equal treatment of partners by uniformly adjusting partners’ tax liabilities and channeling any challenges ... into a single, unified proceeding.” Kaplan v. United States, 133 F.3d 469, 471 (7th Cir.1998) [hereinafter Kaplan II ]; accord Chimblo, 177 F.3d at 121. In order to achieve consistent treatment of partners, TEFRA provides that the tax treatment of “partnership items” is to be determined at the partnership level. 26 U.S.C. § 6221. TEFRA defines a “partnership item” as “any item required to be taken into account for the partnership’s taxable year ... to the extent regulations prescribed by the [IRS] provide that ... such item is more appropriately determined at the partnership level than at the partner level.” Id. § 6231(a)(3). A “non-partnership item” is defined in the negative as an item “which is (or is treated as) not a partnership item.” Id. § 6231(a)(4). An “affected item” is “any item to the extent such item is affected by a partnership item.” Id. § 6231(a)(5). Therefore an affected item is a hybrid in the sense that its proper assessment may require a determination at the individual partner level after the completion of the partnership level proceeding. TEFRA requires partnerships to designate a “tax matters partner” (TMP) to serve as a liaison between the IRS and the individual partners in administrative proceedings, and as a representative of the partners in judicial proceedings. See id. § 6231(a)(7); Addington v. Commissioner, 205 F.3d 54, 60 (2d Cir.2000). The TMP is a fiduciary with the authority to represent and, under certain circumstances, bind the limited partners in such proceedings. Transpac Drilling, 147 F.3d at 223. The individual limited partners may designate any general partner to be the partnership’s TMP. 26 U.S.C. § 6231(a)(7)(A). Absent such designation, the “general partner having the largest profits interest in the partnership at the close of the taxable year involved” is the TMP by default, id. § 6231(a)(7)(B), unless that procedure is impracticable, in which case the IRS may select some other partner to serve as TMP. Id. § 6231(a)(7). After a partnership files its return for a tax year, the IRS may decide to commence an administrative proceeding in order to make adjustments to the return. The IRS has three years from the date the partnership return is due to issue a final partnership administrative adjustment (“FPAA”) affecting liability for taxes attributable to “partnership items.” See id. § 6229(a). However, this three year statute of limitations may be extended by agreement between the IRS and the partnership’s TMP, whose consent binds all partners., Id. § 6229(b)(1)(B). The IRS must notify partners of any adjustments it makes to partnership and nonpartnership items. Notice is given" through an FPAA for adjustments to partnership items, see id. § 6223(a)(2), and through a “notice of deficiency” for non-partnership items, see id. §§ 6211, 6212. See also PAA Mgmt., Ltd. v. United States, 962 F.2d 212, 214-15 (2d Cir.1992). To ease the burden of notifying partners in partnerships exceeding 100 members, TEFRA only requires that the FPAA be sent to “notice partners” (i.e., those who own at least one percent of the partnership) within 60 days after the IRS mails the FPAA to the TMP. See 26 U.S.C. §§ 6223(a)(2), (b)(1), (d)(2), 6231(a)(8). Thus, the IRS is not required to individually notify small-share partners (i.e., “non-notice partners”) of adjustments to partnership items; notice to the TMP is deemed constructive notice upon them. Kaplan II, 133 F.3d at 472. Rather, it is the responsibility of the TMP to forward a copy of the FPAA to non-notice partners. See id. § 6223(g). If the TMP fails to notify non-notice partners of adjustments to partnership items, it does not affect the applicability of any adjustments or partnership proceedings. See id. § 6230(f). For 90 days after the mailing date of the FPAA, the TMP has the exclusive right to file an action for readjustment of the partnership items in either Tax Court, the Court of Federal Claims, or a United States District Court. Id. § 6226(a). If the TMP fails to bring an action to contest the FPAA within that time period, any notice partner, or any group of non-notice partners holding at least a 5% interest in the aggregate, may file suit within the following 60 days in any one of those courts. Id. § 6226(b)(1). Once a petition challenging an FPAA is filed, all partners are considered parties to the action and will be bound by the decision regardless of whether they elected to participate. Id. § 6226(c); Monti II, 223 F.3d at 79. This process prevents subsequent, multiple suits by individual partners. Once a court’s decision in an action for readjustment of partnership items becomes final, it is conclusive with regard to the treatment of partnership items. 26 U.S.C. § 6230(c)(4). If the IRS decides to assess taxes upon the individual partners as a result of the outcome of such a proceeding, it must do so within a year from the date the decision becomes final, id. § 6229(d), by sending a notice of deficiency to each individual partner-taxpayer within that time. See id. § 6212(a). B. Jurisdiction Of Federal District Courts Over Actions For Recovery Of Taxes Wrongfully Assessed Or Collected Pursuant to 28 U.S.C. § 1346(a)(1), federal district courts enjoy original jurisdiction over [a]ny civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws. However, that broad grant of jurisdiction is tempered by certain procedural requirements, and by special rules applicable to “partnership items” under TEFRA. Proeedurally, 26 U.S.C. § 7422(a) provides that no such suit shall be maintained “until a claim for refund or credit has been duly filed” with the IRS. The taxpayer must file his claim for refund with the IRS within two years (according to the administrative limitation period applicable under the facts of this case) from the date he paid the tax that he seeks to recover. Id. § 6511(a). Once a claim for refund has been filed, the taxpayer must still wait six months before bringing suit, unless the IRS sooner renders an adverse decision on the claim. Id. § 6532(a)(1). An adverse decision on the claim triggers a two-year limitations period within which the taxpayer must bring suit. Id. The amount that the taxpayer may recover in such a suit may not exceed the amount he paid to the IRS during the two years immediately preceding the filing of his administrative claim for refund. Id. § 6511(b)(2)(B). These limits on the accrual period, limitation periods, and amount recoverable are jurisdictional in nature. See Magnone v. United States, 902 F.2d 192, 193 (2d Cir.1990) (per curiam) (the “prior claim rule” of § 7422(a) is jurisdictional); Weisbart v. United States Dep’t of Treas., 222 F.3d 93, 94 (2d Cir. 2000) (the limitation period of § 6511(a) is jurisdictional); Roberts v. United States, 242 F.3d 1065, 1067 (Fed.Cir.2001) (the accrual period of § 6532(a)(1) is jurisdictional); Maiman v. IRS, No. 96-CV-5566, 1998 WL 161003, at *1 (E.D.N.Y. Mar.27, 1998) (the limitations period of § 6532(a)(1) is jurisdictional), aff'd mem., 182 F.3d 900 (2d Cir.1999); Howard Bank v. United States, 759 F.Supp. 1073, 1074 (D.Vt.1991) (same), aff'd mem., 948 F.2d 1275 (2d Cir.1991); cf. Porter v. United States, 919 F.Supp. 927, 932-34 (E.D.Va. 1996) (holding that § 6511(b)(2)(A), a companion provision to § 6511(b)(2)(B), is jurisdictional). But cf. Kishnani v. IRS, No. CV-91-3953, 1992 WL 167270, at *4 n. 2 (E.D.N.Y. June 24, 1992) (questioning, but declining to decide, whether § 6511(b)(2)(A) is a substantive, as opposed to jurisdictional, provision). Special rules also limit the district court’s jurisdiction to entertain actions for the recovery of tax “attributable to partnership items” under TEFRA. Specifically, pursuant to 26 U.S.C. § 7422(h) such actions may not be maintained “except as provided in section 6228(b) or section 6230(c)” of the Internal Revenue Code. Id. But if the exceptions contained in § 7422(h) do not apply, then § 7422(h) effectively preempts the general grant of jurisdiction in § 1346(a)(1), and a district court will lack subject matter jurisdiction over any claim for recovery of tax attributable to partnership items. See Monti II, 223 F.3d at 78; Kaplan II, 133 F.3d at 473. A district court will also have jurisdiction over a claim for recovery of tax attributable to a partnership item if that item converts to a nonpartnership item in one of the several ways enumerated in § 6231(b)(1), which provides that a partner’s partnership items shall become nonpartnership items as of the date— (A) the [IRS] mails to such partner a notice that such items shall be treated as nonpartnership items, (B) the partner files suit under section 6228(b) after the [IRS] fails to allow an administrative adjustment request with respect to any of such items, (C) the [IRS] enters into a settlement agreement with the partner with respect to such items, or (D) such change occurs under subsection (e) of section 6223 (relating to effect of [IRS]’s failure to provide notice) or under subsection (c) of this section. 26 U.S.C. § 6231(b)(l)(A)-(D). In summary, should a partnership item fit into one of the exceptions to § 7422(h) or become a nonpartnership item under one of the subparagraphs of § 6231(B)(1), a district court will have jurisdiction to hear the claim. See Hirshfield v. United States, No. 99 Civ. 1828, 2001 WL 579783, at *3 (S.D.N.Y. May 81, 2001). C. Factual History In 1982, Plaintiff Daniel L. Carroll (“Carroll”) purchased an interest in a limited partnership known as Stevens Recycling Associates (“Stevens”) for $16,667. (Compl. ¶ 11; U.S.’ Resp. Req. Admis. ¶ 4.) As one of the partners of the law firm of Shea & Gould, he purchased the limited partnership interest in Stevens based upon the recommendation and advice of other of his law partners. (Compile 8, 10.) Samuel Winer (“Winer”), Stevens’s general partner, was the promoter and the TMP of various plastics recycling limited partnerships, including Stevens. (Id. ¶ 12; U.S.’ Resp. Req. Admis. ¶4.) As a result of Carroll's purchase of one-third of a unit of Stevens, he and his wife claimed on their 1982 joint tax return a deduction for advance rentals in the amount of $13,064, an investment tax credit of $12,810, and a business energy credit of $12,810, thereby reducing their tax liability by $32,138. (Compl. ¶ 11; U.S.’ Resp. Req. Admis. ¶ 5.) On August 17, 1984, at the request of District Counsel for the IRS in Jacksonville, Florida, the Government filed a complaint against Winer in the United States District Court for the Middle District of Florida. (Compl. ¶ 13; U.S.’ Resp. Req. Admis. ¶¶ 5-6.) In that complaint, the Government alleged that Winer had organized and promoted various abusive tax shelters, including Stevens, and had made gross valuation overstatements in connection with Stevens. (Compl. ¶ 14; cf. U.S.’ Resp. Req. Admis. ¶ 7.) The district court apparently agreed, entering, at the IRS’s request, a final judgment on February 18, 1985, permanently enjoining Winer, inter alia, from the “organization, promotion, advertising, marketing, selling or offering for sale of the Tax Shelter [Stevens].” United States v. Winer, No. 84-1123-CIV-T-13, slip op. ¶ 3(a) (M.D.Fla. Feb. 18, 1985) (CompLEx. A.). In addition, the court enjoined Winer from representing any investor in Stevens in order to obtain tax deductions or credits. See id. ¶ 3(b). Pursuant to the final judgment, Winer was to send a letter to each partner in Stevens tendering his resignation as TMP and waiving his right to intervene as TMP in any court proceeding on behalf of the partnership. See id. ¶ 4. Winer resigned as TMP and sent each limited partner of Stevens a form notice informing him or her of the injunction. (Compl. ¶ 18; cf. U.S.’ Resp. Req. Admis. ¶ 13.) The attorney representing the IRS in the district court proceeding selected Stuart Hirshfield (“Hirshfield”), one of the limited partners of Stevens, to serve as Stevens’ replacement TMP. (Comply 19.) The notice sent by Winer to the Stevens limited partners reflected Hirshfield’s new status. (Id.) While Winer was enjoined from acting as TMP and Hirshfield was serving as his replacement, the IRS sought to reinstate Winer as the TMP for Stevens for specific limited purposes. (Id. ¶ 21; U.S.’ Resp. Req. Admis. ¶ 20.) Winer agreed to be reinstated under the belief that he could be compelled to do so, and under threat of independent legal action against him by the IRS. (Comply 21.) Therefore, by “Joint Motion for Specific Relief from Final Judgment of Permanent Injunction,” filed without notice to the Stevens limited partners, and notwithstanding that Hirsh-field had not been removed as TMP, the IRS and Winer requested that Winer “be allowed to act as tax matters partner ... for the purpose of providing administrative services.” (Id.; cf. U.S.’ Resp. Req. Ad-mis. ¶¶ 21-23.) Without Hirshfield’s knowledge, or the knowledge of any of Stevens’s limited partners, the district court granted that motion on September 17, 1996, and ordered that Winer “may act as tax matters partner for the purpose of providing administrative services.” (Compl. ¶ 22; cf. U.S.’ Resp. Req. Admis. ¶¶ 24-25, 27-28.) At the request of the IRS, the “administrative service” provided by Winer was his signature on Forms 872-P extending the already expired three-year limitations period for issuance of an FPAA, thereby allowing the IRS to issue an FPAA to Stevens and to serve notices of deficiency upon the Stevens limited partners. (Compl. ¶ 25; U.S.’ Resp. Req. Admis. ¶ 29.) Winer never informed the Stevens limited partners that he had extended the limitations period. (Comply 25.) On or about June 5, 1989, the Government issued a Notice of FPAA to Stevens for tax years 1982, 1983, 1984, and 1985, which was addressed to Winer as TMP. {Id. ¶ 29; U.S.’ Resp. Req. Admis. ¶¶ 31, 33.) The FPAA drastically adjusted Stevens’ income and deductions. (ComplA 29.) On July 24, 1989, apparently in violation of the final judgment of the federal district court in Florida, Winer, representing himself to be Stevens’ TMP, brought a § 6226 action for readjustment of the partnership items for tax years 1982 through 1985 in the United States Tax Court on behalf of Stevens. {Id. ¶ 31; U.S.’ Resp. Req. Ad-mis. ¶ 34; U.S.’ Mot. Dismiss Alt. Summ. J. Ex. 2.) In response to Winer’s petition, IRS’s District Counsel in Boston, Massachusetts, filed an Answer in the Tax Court. (Comply 31.) Although the IRS’s attorneys knew, inter aha, that Winer had been enjoined from acting as Stevens’ TMP in any court proceeding, that Hirshfield had been appointed as Stevens’ TMP, and that Winer was not acting as the Stevens’ limited partners’ fiduciary, {id. ¶ 33, see id: ¶ 35), but under a conflict of interest, cf. Transpac Drilling, 147 F.3d at 227-28, the IRS failed to raise these defenses in its Answer or otherwise inform the Tax Court of these facts, (Comply 33), instead pursuing a judgment from the Tax Court, {id.). On November 9, 1993, pursuant to the Tax Court Rule of Practice and Procedure 248(b), the IRS filed a Motion for Entry of Decision in Tax Court, representing that Winer had “entered into a settlement agreement” with the IRS and “agreed to the proposed decision.” {Id. ¶ 35; see U.S.’ Resp. Req. Admis. ¶ 38.) Again, the motion did not disclose to the Tax Court the restraints on Winer’s authority to represent and bind the limited partners, or Winer’s lack of a fiduciary relationship. (Compilé 35-36.) Nor did the motion disclose that neither the IRS nor Winer would provide notice of the settlement or the judgment of the Tax Court to Stevens’ limited partners. {Id. ¶¶ 35, 38, 40.) Pursuant to Winer’s settlement with the IRS, the Tax Court, on February 23, 1994, entered an undated decision (the “February 1994 Decision”) on its docket relating to Stevens’ income for tax years 1982, 1983, 1984, and 1985. Carroll II, 2000 WL 1819419, at *1. On June 6, 1994, the Tax Court issued an Order and Decision (the “June 1994 Decision”) that purported to vacate the February 1994 Decision on the grounds that through inadvertent clerical error, it did not bear the requisite “entered date.” Id. at *1. However, the June 1994 Decision was otherwise identical to the February 1994 Decision in all material respects. Id. D. Tax Assessments, Payments, And Requests For Refund And/Or Abatement 1. Assessments The Subject Of Plaintiffs’ Motion For Partial Summary Judgment In Carroll I And Carroll Ii On July 3, 1995, the IRS issued Plaintiffs a notice of deficiency, proposing deficiencies for the 1982 tax year for negligence penalties and valuation overstatement penalties under 26 U.S.C. §§ 6653(a) and 6659. (Carroll Aff. of 4/15/99 ¶ 8 & Ex. D.) On November 20, 1995, Plaintiffs were assessed the penalties under these two statutes in the amounts of $51,357.27 and $7,686.00, respectively, plus interest. (U.S.’ Local R. 56.1 Stmt. Facts ¶ m & Ex. 4; Pis.’ Resp. U.S.’ Local R. 56.1 Stmt. Facts 1M.) Plaintiffs paid to the IRS a total of $81,391.95 in respect of the penalty additions and interest. (U.S.’ Local R. 56.1 Stmt. Facts ¶ o; Pis.’ Resp. U.S.’ Local R. 56.1 Stmt. Facts ¶ O.) In Carroll II, familiarity with which is assumed, this Court held that Plaintiffs were entitled to recovery of $81,079.16 that they paid with respect to the July 3, 1995, notice of deficiency. 2000 WL 1819419, at *8. In that regard, the Court held as a matter of law that pursuant to 26 U.S.C. §§ 7481(a)(1) and 7483 (providing that a decision of the Tax Court becomes final upon the expiration of the time allowed for filing a notice of appeal, which is 90 days after the Tax Court’s decision is entered), the February 1994 Decision of the Tax Court became final on May 24, 1994, such that (1) the Tax Court had no jurisdiction to vacate the final order by later order; and (2) the July 3, 1995, notice of deficiency issued to Plaintiffs was time-barred as a matter of law under the one-year limitation period of § 6229(d). Id. at *5, *8.. In short, the Court granted Plaintiffs’ motion for partial summary judgment on Count IX of the Complaint for the reasons identified in Count III. See discussion infra Part 1.E. 2. Other Challenged Assessments On July 17, 1995, the IRS assessed additional tax against Plaintiffs for the year 1982 in the amount of $32,138.00. The same day, the IRS also assessed against Plaintiffs tax-motivated transaction interest in the amount of $99,488.54, pursuant to 26 U.S.C. § 6621(c). (U.S.’ Local R. 56.1 Stmt. Facts Kj & Ex. 4; Pis.’ Resp. U.S.’ Local R. 56.1 Stmt. Facts ¶ J; Carroll Aff. Opp’n Mot. Dismiss Alt. Summ. J. & Supp. Cross-Mot. Supplement Compl. Ex. 1.) Plaintiffs paid to the IRS a total of $136,913.43 on account of these assessments of tax and interest. (U.S.’ Local R. 56.1 Stmt. Facts ¶ k; Pis.’ Resp. U.S.’ Local R. 56.1 Stmt. Facts ¶ K.) 3. Plaintiffs’ Payments and Requests for Refund and/or Abatement With respect to the assessments against Plaintiffs described supra Parts I.D.1-2, Plaintiffs paid the the following dates: following amounts on 09/01/95 $32,138.00 10/12/95 3,000.00 11/02/95 3,000.00 11/30/95 3,000.00 01/16/96 95,771.43 04/15/96 563.55 06/03/96 20,000.00 07/18/96 43.00 08/13/96 2,000.00 09/12/96 2,000.00 10/16/96 2,000.00 11/15/96 51,295.52 11/27/96 3,186.13 03/11/97 910.30 (U.S.’ Local R. 56.1 Stmt. Facts Ex. 4.) On May 29, 1996, Plaintiffs executed a Form 843 (i.e., a “Claim for Refund and Request for Abatement”) and a Form 1040X (i.e., an “Amended U.S. Individual Income Tax Return”). (U.S.’ Opp’n Pis.’ Stmt. Facts Local R. 56.1 ¶25 & Ex. 8.) The Forms 843 and 1040X were mailed under cover letter dated May 30,1996, and received by IRS on June 4, 1996. {Id. Exs. 7, 8.) The cover letter requested “that these claims for refunds be expedited.” {Id. Ex. 7.) The face of Form 843 references §§ 6653(a) and 6659 (i.e., the provisions of the Internal Revenue Code under which Plaintiffs were assessed deficiencies the subject of Carroll I and Carroll II). An “Addendum to Form 843” addresses a list of reasons argued by Plaintiffs as to why the deficiencies assessed under these provisions “should be abated and, to the extent paid, refunded to the taxpayer.” The first reason is stated as follows: 1. The negligence penalty and valuation overstatement penalty assessments in the respective amounts of $51,351.27 and $7,686.00 made under Sections 6653(a) and 6659 of the Internal Revenue Code for the year [1982] are invalid because the underlying tax assessments upon which they are based are invalid and/or barred by the statute of limitations for the reasons more fully set forth in Form 1040X (copy attached). Plaintiffs’ “Addendum to Form 1040X,” in turn, makes the specific argument — accepted by this Court in Carroll II — that because the February 1994 Decision of the Tax Court became final on May 24, 1994, the IRS’s July 3, 1995, notice of deficiency was time-barred as a matter of law under the one-year limitation period of § 6229(d). By a fill-in-the-blank form letter dated September 13, 1996, the IRS wrote Plaintiffs: Dear T/P This is in reply to your inquiry dated 5-29-96. The issue you raise in your correspondence is related to the following partnership: STEVENS RECYCLING. Your request for abatement is denied for the reason explained below. This partnership is subject to the uniform partnership proceedings of the Internal Revenue Code (Section 6221 and other sections, also known as the TEFRA partnership proceedings). The partnership proceedings for the subject partnerships were completed due to the reason checked below: / Court decision entered and became final on 6/6/94. _ Final Partnership Notice (FPAA) defaulted on_/_/_ The issue you have raised was not raised during the partnership proceeding and can not be raised after the proceedings have been completed. Since the partnership proceedings have been completed, we will not consider a request for abatement. If you have received a Notice of Deficiency determining penalties with respect to your investment in the above partnership, you should follow the instructions set forth in the Notice of Deficiency concerning the alternatives available to you; either agreement to the assessment of the penalties or your right to petition the Tax Court. (Carroll Aff. Opp’n Mot. Dismiss Alt. Summ. J. & Supp. Cross-Mot. Supplement Compl. ¶3 & Ex. 4.) This letter does not recite whether it is intended as a denial of Plaintiffs’ Form 843 “inquiry,” or Plaintiffs’ Form 1040X “inquiry,” or both. On August 10, 1998, Plaintiffs executed another Form 843 (“August 1998 Form 843”), which was received by the IRS on August 19, 1998. (Id. ¶ 5, Ex. 5.) The August 1998 Form 843 “request[ed] a recalculation of the interest due on the assessment for 1982 and a refund of $1,222.75 plus interest.” This recalculation was requested on the basis that the IRS had allocated each of Plaintiffs’ payments dated 10/12/95, 11/02/95, and 11/30/95, as well as a portion of Plaintiffs’ payment dated 01/16/96, to penalties assessed against Plaintiffs (which were accruing interest at a rate of 9%), rather than to taxes and interest assessed against Plaintiffs (which were accruing interest at the rate of 10.6%). The August 1998 Form 843 also requested that the IRS eliminate a penalty of $160.69 assessed against Plaintiffs, since Plaintiffs knew of no reason justifying the assessment of that penalty, and the IRS had not yet offered one. On September 8, 1999, Plaintiffs executed an “Amended” Form 843 that purported to amend[] the previously filed Claim for Refund and Request for Abatement dated May 29, 1996, a copy of which in annexed hereto, (which Claim for Refund and Request for Abatement has not been acted upon by the IRS), so as to amends [sic] said Claim for Refund and Request for Abatement dated May 29, 1996 to state that the full amount of penalties and interest sought totaling $81,955.50 has been paid. (Id. ¶ 6 & Ex. 7 [hereinafter “Amended Form 843-1996”].) Annexed to Amended Form 843-1996 were copies of Plaintiffs’ Forms 843 and 1040X dated May 29, 1996. On the same date, Plaintiffs executed another “Amended” Form 843 that purported to amend[] the previously filed Claim for Refund and Request for Abatement dated August 10, 1998, a copy of which is annexed hereto as Exhibit A, (which Claim for Refund and Request for Abatement has not been acted upon by the IRS), so as to: 1. Consolidate therewith the previously filed Claim for Refund and Request for Abatement dated May 29, 1996, a copy of which is annexed hereto as Exhibit B, which Claim for Refund and Request for Abatement was never acted upon by the IRS. 2. Amend the Claim for Refund and Request for Abatement dated May 29, 1996 to state that the full amount of penalties and interest sought totaling $81,995.50 has been paid as indicated on the material included with the Claim for Refund and Request for Abatement dated August 10,1998. (Id. ¶ 6 & Ex. 8 [hereinafter “Amended Form 843-1998”].) Annexed to Amended Form 843-1998 were copies of the August 1998 Form 843, as well as Plaintiffs’ Forms 843 and 1040X dated May 29,1996. Plaintiffs’ Amended Forms 843-1996 and 843-1998 were sent under separate cover letters dated September 10, 1999, and were received by the IRS on September 13, 1999. (Id. ¶ 6 & Exs. 7, 8.) By letter dated January 4, 2000, the IRS responded, in relevant part, to Plaintiffs’ “inquiry of September 10, 1999,” as follows: We understand you are concerned about the tax, penalties and interest assessments on the 1982 tax account. To resolve your concern we reviewed the account and based on your explanation, we reapplied the payments designated for tax and tax motivated interest as per your request. This results in a decrease in the amount of interest charged of $1,056.09. You will receive a refund of $1056.09 plus interest when the adjustment posts, in about four weeks, if you own no other federal agency- When additional tax is not paid within the ten days of the notice, a late payment penalty is charged. The notice to pay the additional tax was issued July 17, 1995, payment was not received until September 1, 1995, therefore, the late payment penalty of $160.69 was assessed. Your claim filed September 10, 1999 for abatement of the penalties and interest has been denied. You will receive a formal letter of denial, which will explain your appeal rights, under separate cover. (Id. ¶ 9 & Ex. 11.) Finally, by letter dated January 18, 2000, Plaintiffs received the IRS’s formal letter of denial, which stated, in pertinent part, This letter is your legal notice that we have disallowed your claim(s). We can’t allow your claim(s) for refund or credit ... for the reason(s) listed below. The Internal Revenue Services [sic] position is the Tax Matters Partner was in authority at the time of signing and was reinstated. The penalties are valid assessments. (Pis.’ Reply Aff. Supp. Cross-Mot. Supplement Compl. Ex. 12.) E. Plaintiffs’ Complaint In their Complaint, filed September 11, 1998, Plaintiffs claim (1) that the tax assessments against them that rest upon the validity of Tax Court’s proceedings are time-barred, invalid, or otherwise without force and effect, since Winer had no authority to sign Form 872-P extending the three year limitations period for issuance of an FPAA, because Winer had no authority to either commence or settle action for readjustment of the partnership items in the Tax Court, and because the limited Stevens partners were effectively unrepresented, or represented by someone who the IRS knew to be acting under a conflict of interest (see Compl. ¶¶ 24-39) [hereinafter “Count I”]; (2) that as a result of the IRS’s actions, Plaintiffs were deprived of appropriate notice of the Tax Court proceedings, of the opportunity to file a petition challenging the FPAA, of notice of any settlement of the Tax Court proceedings, and of “the benefits of the TEFRA partnership audit provisions,” such that they were deprived of their constitutional right to due process (id. ¶¶ 40-41) [hereinafter “Count II”]; (3) that even if the February 1994 Decision of the Tax Court were not time barred or invalid, any assessment of tax or statutory interest pursuant to that decision is time-barred by 26 U.S.C. § 6229(d) (id. ¶¶ 42-44) [hereinafter “Count III”]; (4) that because the Tax Court did not find the Stevens partnership to have been engaged in a tax-motivated transaction within the meaning of 26 U.S.C. § 6621(c)(3), there is no basis for imposition of the penalty rate of interest pursuant to § 6621(c) of the Code (id. ¶ 45) [hereinafter “Count IV”]; (5) that “the resignation of Winer as the TMP and the [IRS]’s failure to follow the mandate of the applicable Regulations in selecting and dealing with the substitute TMP and attempting to reinstate Winer resulted in the imposition of excessive interest against the [Plaintiffs from February 18, 1986” such that this amount of excessive interest should be abated “[p]ursuant to Section 6404(e) and any other provision of law, regulation, ruling, or judicial doctrine,” and to the extent paid, refunded (id. ¶ 46) [hereinafter “Count V”]; (6) that the IRS, by “actively aid[ing] and requirfing] Winer to violate his fiduciary obligations to the Stevens Partners for its own benefit ... is estopped to collect taxes, interest and penalties assessed with [the] consent of Winer as TMP when he was as a matter of fact, the de facto agent of the [IRS] rather than the partners he was alleged to represent” (id. ¶ 47) [hereinafter “Count VI”]; (7) that pursuant to the decisions of Tax Court in Miller v. Commissioner, No. 10382-86, and Miller v. Commissioner, No. 10383-86, the IRS “conceded that the increased rate of interest imposed by Section 6621(c) of the Code was not applicable in a case presenting issues that are identical to those involved in the instant case” such that, according to the consistency rules of 26 U.S.C. § 6224(c)(2), Plaintiffs are entitled to the terms of the Miller decisions, requiring a refund of the penalty rate of interest of § 6621(c) (id. ¶¶ 48-49) [hereinafter “Count VII”]; (8) that pursuant to 26 U.S.C. § 7430, Plaintiffs are entitled to reasonable administrative costs incurred in connection with filing their claim for refund and in bringing this action in support of their claim for refund (id. ¶ 50) [hereinafter “Count VIII”]; (9) that the assessments for additions to tax for negligence and valuation® overstatement under §§ 6653(a) and 6659 are time barred and/or invalid for the same reasons set forth in Counts I and III (id. ¶¶ 55-56) [hereinafter -“Count IX”]; (10) that the negligence penalty assessments under § 6653(a) are invalid because the IRS conceded that such negligence penalties were inapplicable Miller v. Commissioner, No. 10382-86, and Miller v. Commissioner, No. 10383-86, such that, according to the consistency rules of 26 U.S.C. § 6224(c)(2), Plaintiffs are entitled to the terms of the Miller decisions, requiring the negligence penalty assessments to be refunded to Plaintiffs (id. ¶¶ 57-58) [hereinafter “Count X”]; (11) that the negligence penalty assessments under § 6653(a) are invalid because Carroll was diligent in determining to invest in Stevens and relied upon competent and disinterested professional advisers in doing so (id. ¶ 59) [hereinafter “Count XI”]; (12) that the valuation overstatement penalty under § 6659 is invalid because the underpayment was not attributable to a valuation overstatement within the meaning of that provision (id. ¶ 60) [hereinafter “Count XII”]; and (13) that the valuation overstatement penalty under § 6659 is invalid because there was a reasonable basis for the valuation claimed on Plaintiffs’ return, which was made in good faith (id. ¶ 61) [hereinafter “Count XIII”]. II. DISCUSSION A. IRS’S Motion To Reconsider Carroll II’s Reconsideration Of Carroll I The IRS raises three grounds for reconsideration of Carroll II’s reconsideration of Carroll I. The Court concludes that the IRS’s first two arguments lack merit, but that its third argument, which goes to the Court’s subject matter jurisdiction, warrants partial reconsideration of Carroll II. 1. Effect of Post-1969 Amendments to 26 U.S.C. § 7459(c) First, the IRS contends that this Court in Carroll II incorrectly failed to account for certain post-1969 amendments to 26 U.S.C. § 7459(c) in concluding that, for purposes of determining the time in which to take an appeal, the provision’s reference to the “rendering” of a decision lacks the significance that the IRS ascribes to it. (See Mem. Law Supp. U.S.’ Mot. Recons, at 7-8.) Whatever the meaning of the amendments cited by the IRS beyond demonstrating that § 7459(c) remains “viable” and “not merely some superfluous legislative anachronism,” (id. at 8; but cf. Mem. Law Supp. U.S.’ Mot. Dismiss Alt. Summ. J. at 30 n. 18), the amendments do not demonstrate that a Tax Court decision must be dated before it can become final or that the date a decision is “rendered” has independent significance from the date that it is “entered” for purposes of determining the window in which to take an appeal. Nor, as suggested by the IRS, (Mem. Law Supp. U.S.’ Mot. Recons, at 8), would the Tax Court’s interpretation of § 7459(c) be entitled to deference (entertaining, for the moment, the speculative notion that the Tax Court in fact interpreted or relied upon § 7459(c) in issuing the June 1994 Decision). See Callaway v. Commissioner, 231 F.3d 106, 115 (2d Cir. 2000). 2. Res Judicata Effect of Tax Court’s June 1994 Decision Second, the IRS asserts that this Court “failed to address the [IRS]’s objection that [Plaintiffs are barred under the doctrine of res judicata from collaterally attacking the [June 1994 Decision] of the ... Tax Court (from which no appeal was taken).” (Mem. Law Supp. U.S.’ Mot. Recons. at 1.) That assertion is incorrect. The Court stated in Carroll II that it had considered the IRS’s other arguments concerning Plaintiffs’ motion for partial summary judgment and found that they did not alter its decision to grant reconsideration of Carroll I. 2000 WL 1819419, at *8.. Therefore the IRS’s argument premised on the preclusive effect of the June 1994 Decision is proeedurally barred as a repetitive argument on an issue already considered by the Court. See Thomas v. A.R. Baron & Co., 967 F.Supp. 785, 790 (S.D.N.Y.1997). Notwithstanding that the IRS’s reassertion of this argument is procedurally barred, the Court explains below why the argument is substantively unpersuasive. ■ The IRS reasons that because Plaintiffs were by statute constructive participants in the Tax Court proceeding initiated by Winer for readjustment of partnership items, (see Reply Br. Supp. U.S.’ Mot. Recons, at 1 (citing 26 U.S.C. § 6226(c))), they are bound by the decisions of the Tax Court, even if those decisions are in error, and even if those decisions are “voidable” for lack of jurisdiction. (Mem. Law Supp. U.S.’ Mot. Recons, at 2.) According to the IRS, in every decision of the Tax Court inheres the Tax Court’s determination that it has jurisdiction to issue such decision. (Id.) Therefore, the IRS maintains, the Tax Court’s tacit determination that it had jurisdiction to issue the June 1994 Decision, notwithstanding that the February 1994 Decision had already become final, cannot be collaterally attacked in this Court. (Id. at 2-4.) Instead, Plaintiffs’ “exclusive manner to challenge ... whether the Tax Court had the ability to vacate the undated [February 1994] Decision and to enter [the June 1994] Decision ... was to appeal” the latter. (Id. at 5.) The Court rejects the IRS’s argument. The IRS assumes improvidently that Plaintiffs’ action for recovery of taxes is necessarily a collateral attack on the jurisdiction of the Tax Court, rather than an attack on the IRS’s interpretation of the legal effect of the June 1994 Decision as restarting the clock on the time period within which the IRS was required to serve its notice of deficiency upon Plaintiffs. Cf. Banque Nationale De Paris v. 1567 Broadway Ownership Assocs., 248 A.D.2d 154, 155, 669 N.Y.S.2d 568, 569 (1st Dep’t 1998) (distinguishing a collateral attack upon a judgment, on the one hand, from a legal challenge to an erroneous interpretation of that judgment, on the other). Although in Carroll II this Court concluded that the “Tax Court had no jurisdiction to vacate [the February 1994 Decision] by later order,” — a conclusion the Court finds no reason to upset — even if it were assumed to the contrary that the Tax Court did in fact have jurisdiction to issue the June 1994 Decision vacating the February 1994 Decision, that does not mean that June 1994 Decision, or the vacatur contained therein, had the legal effect of depriving the February 1994 Decision of the finality it had attained on May 24, 1994, as the IRS seems to believe it did. Rather, like those cases in which Federal Rule of Civil Procedure 60(a) is used to correct clerical mistakes in judgments without restarting or tolling the time in which to take an appeal, the June 1994 Decision “did not make any meaningful change to the prior order and therefore did not start the statute of limitations clock anew.” Hirshfield, 2001 WL 579783, at *10. So concluded Judge Sweet upon identical facts in an action for recovery of taxes paid by another Stevens partner. See id. The Court agrees with Judge Sweet’s analysis on this point. Even if the Tax Court had unquestioned jurisdiction to vacate and reenter the February 1994 Decision as postdated, that jurisdie-tionally sound vacatur and reentry would have had no legal effect on the time period within which the IRS was required to serve its notice of deficiency upon Plaintiffs. The important point here is that the Tax Court’s vacatur and reentry corrected a mere clerical error without purporting to restart the limitations clock, and without changing the substantive rights of the parties in such a way as would restart the running of the limitations clock as a matter of law. As explained in Robert Louis Stevenson Apartments, Inc. v. Commissioner, 337 F.2d 681 (8th Cir.1964) (cited in 1967 Advisory Committee Note to Federal Rule of Civil Procedure 13(a)), it is in those circumstances when the Tax Court’s correction or vacatur would necessarily address “ ‘questions of substance’ ” or go “to the core of the Tax Court’s conclusion” that the time in which to appeal would run from the date of such correction or vaca-tur. See id. at 683-85. On the other hand, where, as here, the correction or vacatur addresses a “ ‘mere matter of form,’ ” it does not deprive the Tax Court’s decision of finality. See id. at 684; Seiberling Rubber Co. v. United States, 156 Ct. Cl. 219, 297 F.2d 842, 844-46 (1962) (four judge panel) (where Tax Court, on its own motion, modified its decision within the thirty-day window before such decision was to become final, but the modification was “purely a formal or mechanical one,” the Tax Court’s correction could not extend or restart the running of the thirty-day period). Because Plaintiffs’ entitlement to the recovery of penalties they paid to the IRS need not hinge upon whether the Tax Court lacked jurisdiction to enter the June 1994 Decision, but upon whether that decision, assuming its validity, had any legal effect on the time in which the IRS was required to issue its notice of deficiency, the IRS’s res judicata argument is inapplicable, and need not be considered further., 3. Jurisdictional Limitation on Plaintiffs’ Amount of Recovery Third, the IRS raises for the first time in this second motion for reconsideration its argument that § 6511(b)(2)(B) limits the amount that Plaintiffs may recover to $20,000. (Mem. Law Supp. U.S.’ Mot. Recons. at 5-7.) Because § 6511(b)(2) is jurisdictional in nature, this argument may be raised for the first time on a motion for reconsideration. Zeier v. United States IRS, 80 F.3d 1360, 1363-64 (9th Cir.1996). Section 6511(b)(2)(B), which applies to tax penalties as well as taxes alone, e.g., Pham v. United States, 42 Ct. Cl. 886, 888 (1999), provides that the amount a taxpayer may recover in his claim for refund “shall not exceed the portion of the tax paid during the 2 years immediately preceding the filing of the claim.” 26 U.S.C. § 6511(b)(2)(B). Although Plaintiffs paid a total of $81,391.95 in penalty additions and interest in several payments between May 29, 1996, and March 7, 1997, (U.S.’ Local R. 56.1 Stmt. Facts ¶ o; Pis.’ Resp. U.S.’ Local R. 56.1 Stmt. Facts ¶ O), the IRS points out that only one installment payment of $20,000, made on June 3, 1996, had been paid as of the date Plaintiffs’ Form 843 dated May 29, 1996, was received by the IRS on June 4, 1996. (Mem. Law Supp. U.S.’ Mot. Recons, at 5.) Because only $20,000 had been paid in respect of penalty additions during the two years immediately preceding June 4, 1996, it is the IRS’s contention that § 6511(b)(2)(B) jurisdictionally limits any recovery to that amount. This argument is closely related to another jurisdictional argument raised by the IRS in its own motion to dismiss, or in the alternative, for summary judgment. The IRS urges that Plaintiffs’ recovery of negligence and valuation overstatement penalties is barred under the “prior claim rule” of § 7422(a), because under Rock Island, Arkansas & Louisiana Railroad Co. v. United States, 254 U.S. 141, 41 S.Ct. 55, 65 L.Ed. 188 (1920), and its progeny, “a claim filed prior to payment is nothing more than a request for abatement, and therefore cannot constitute a duly filed claim for refund” within the meaning of § 7422(a). (Mem. Law Supp. U.S.’ Mot. Dismiss Alt. Summ. J. at 36; Reply Br. Supp. U.S.’ Mot. Dismiss Alt. Summ. J. at 7.) When the prior claim rule of § 7422(a) is read together with the applicable limitations bar of § 6511(a), requiring an administrative claim for refund to be brought within two years from the time the tax was paid, “the import of these sections is clear: unless a claim for refund of a tax has been filed within the time limits imposed by § 6511(a), a suit for refund ... may not be maintained in any court.” United States v. Dalm, 494 U.S. 596, 602, 110 S.Ct. 1361, 108 L.Ed.2d 548 (1990) (quoted in Mem. Law Supp. U.S.’ Mot. Dismiss Alt. Summ. J. at 36). Because the IRS takes the position that the effect of § 6511(b)(2)(B) is to limit the amount of recovery of “what would otherwise be a valid claim for refund under § 6511(a),” (Mem. Law Supp. U.S.’ Mot. Dismiss Alt. Summ. J. at 37), the Court finds it helpful to address whether the application of §§ 7422(a) and 6511(a) to the facts of this case would permit any recovery before determining whether § 6511(b)(2)(B) limits the jurisdictional amount of such recovery. Although the IRS originally maintained that Plaintiffs had not made “any payment” of penalties prior to filing its original Form 843, (Reply Br. Supp. U.S.’ Mot. Dismiss Alt. Summ. J. at 6 (emphasis added)), such that that original claim was “only a request for abatement,” (Def.’s Sur-Reply Pis.’ Cross-Mot. at 4), and could not, as a matter of law, have constituted a prior claim for refund, see Rock Island, Ark. & La. R.R., 254 U.S. at 142, 41 S.Ct. 55, the IRS now acknowledges in its motion for reconsideration of Carroll II that $20,000 had been paid in advance of Plaintiffs’ claim for refund. An initial question, then, is whether, or to what extent, this partial payment of penalties satisfies the prior claim rule. Put differently, may Plaintiffs now recover the entire $81,391.95 in penalty additions and interest they paid by virtue of having made a payment of part of that amount prior to filing their claim for refund, or does § 7422(a)’s prior claim rule limit their recovery to the $20,000 for which they had actually made a prior claim within the time constraints of § 6511(a), or is recovery barred altogether on the grounds that a taxpayer’s prior claim for refund may only be considered “duly filed” within the meaning of § 7422(a) after the entire tax has been paid? Plaintiffs contend, relying on United States v. Fidelity & Deposit Co., 178 F.2d 753 (4th Cir.1949) (per curiam), that the Court’s jurisdiction over the full amount they paid in respect of the penalty additions and interest is satisfied notwithstanding Plaintiffs’ failure to make full payment prior to filing their original claim for refund with the IRS. (Pis.’ Mem. Law Opp’n Def.’s Mot. Dismiss Alt. Summ. J. at 36.) In that case, the Fourth Circuit Court of Appeals, in denying a petition for rehearing, held that the United States District Court for the District of Maryland properly had jurisdiction over the taxpayer’s claim: As to the jurisdiction of the District Court ..., it appeared that, while the claim for refund was filed before the fourth installment of the tax was paid, the claim was denied after the payment of the installment and that suit was not filed until almost two and one-half years after the payment. To hold under such circumstances that taxpayer should be thrown out of court and told to file a new claim and then bring suit on it, when the government is denying any liability at all, would be to return to the reign of senseless technicality from which the courts have happily freed themselves. Fidelity & Deposit, 178 F.2d at 754. The IRS, on the other hand, relies on cases such as Lefrak v. United States, No. 94 CIV. 7668, 1996 WL 420308 (S.D.N.Y. July 26, 1996), that engraft the “full payment rule” of Flora v. United States, 362 U.S. 145, 177, 80 S.Ct. 630, 4 L.Ed.2d 623 (1960) (interpreting the broad jurisdictional grant of 28 U.S.C. § 1346(a)(1) to require “full payment of the assessment before an income tax refund suit can be maintained in a Federal District Court”), into the “prior claim rule” of § 7422(a): It is clear ... that a prospective plaintiff must satisfy the full payment rule ... through full payment of the tax assessment at issue ... prior to filing a claim with the IRS in order for that claim to constitute a duly filed claim for refund or credit as required by the prior-claim rule. Lefrak, 1996 WL 420308 at *5; see also Nelson v. United States, 727 F.Supp. 1357, 1358 (D.Nev.1989) (holding that claim for refund could not have been “duly filed” within the meaning of § 7422(a) “[u]ntil the entire tax was paid,” such that the court lacked jurisdiction even if partial payment were assumed to have preceded claim for refund (emphasis added)); Douglas v. United States, 727 F.Supp. 239, 240 (W.D.N.C.1989) (“[Cjlaims for refund submitted before full payment of assessment are not ‘duly filed’ under the provisions of section 7422(a) -” (emphasis added)). But see King v. United States, 949 F.Supp. 787, 789-90 (E.D.Wash.1996) (holding that § 7422(a) only requires full payment prior to bringing suit, and rejecting IRS’s argument that full payment must be made before filing a claim for refund with the IRS), aff'd on other grounds, 152 F.3d 1200, 1201 (9th Cir.1998). In the opinion of the Court, Plaintiffs, who chronologically (1) made partial payment of the penalties assessed against them, (2) filed a claim for refund for the total amount of such assessment within the two-year limitations period of § 6511(a) applicable in this case, (3) paid the remainder of the assessment in full, and then (4) timely filed suit, see § 6532(a)(1), to recover all the monies they paid in respect of such assessment, have satisfied both the “full payment rule” and, to the extent of their partial payment preceding their administrative claim for refund, the “prior claim rule,” and must be permitted to recover at least the amount of their initial partial payment. Therefore the Court rejects the rule of Lefrak as applied to this case, and treats the original Form 843 as (1) a claim for refund to the extent Plaintiffs had in fact made payment, and (2) a request for abatement to the extent Plaintiffs had not yet made payment. See Etheridge v. United States, 300 F.2d 906 (D.C.Cir.1962) (applying the same approach). This approach respects both the full payment and prior claim rules without running afoul of any statutory language. Moreover, both parties appear to concede that it is the appropriate approach in this case. In that regard, Plaintiffs’ Addendum to Form 843, at one point, requests that the IRS’s assessment “be abated and, to the extent paid, refunded to the taxpayer” (emphasis added). The IRS, for its part, only advanced the Lefrak rule in connection with its initial assertion that Plaintiffs had made no payment toward penalties before filing their administrative claim. Acknowledging now that Plaintiffs had paid $20,000 toward penalties before filing their administrative claim, the IRS advances only the argument that Plaintiffs’ recovery is limited in amount to that sum, without further mention of the Lefrak rule that would ostensibly foreclose recovery altogether. Likewise, the Court thinks that the result reached in Lefrak (i.e., dismissal for lack of subject matter jurisdiction for failure to comply with the prior claim rule where the plaintiff had made no payment before filing her administrative claim for refund) would have been appropriate had Plaintiffs had paid nothing before filing their original Form 843, but that Lefrak’s analysis is not persuasive to extend its result to circumstances in which partial payment has preceded the filing of the claim. The Court’s rejection of the Lefrak rule as applied to the facts of this case means only that Plaintiffs are not jurisdictionally foreclosed from recovering the $20,000 they paid and for which they made a prior refund claim before bringing suit. Whether they may recover the remaining $61,391.95 is another question, which the Court does not think is answered by the Fourth Circuit’s decision in Fidelity & Deposit. The Court reads Fidelity & Deposit as one of several cases that find a waiver of the prior claim rule where the IRS has treated a full or partial request for abatement as if it were actually a claim for refund, and denied the claim on its merits prior to the taxpayer’s suit. See King v. United States, 152 F.3d 1200, 1201 (9th Cir.1998) (finding waiver of the prior claim rule where, in response to a request for abatement, the IRS “expressly reached the merits of ‘your claim for a refund,’ disallowed it on the merits, and expressly informed the taxpayers that they were entitled to contest the issue further by filing suit in district court”); Import Wholesalers Corp. v. United States, 177 Ct.Cl. 493, 368 F.2d 577, 578-80 (1966) (per curiam) (finding waiver of the prior claim rule where taxpayer, in request for abatement, set forth the necessary elements for a refund, and IRS district director responded to request with a “claim for refund” form letter); Continental Ill. Nat’l Bank & Trust Co. v. United States, 94 Ct.Cl. 126, 39 F.Supp. 620, 623-24 (1941) (five judge panel) (finding waiver of the prior claim rule as to unpaid portion of tax where IRS considered taxpayer’s partially premature Form 843 on the merits and rejected it after taxpayer had made full payment of the deficiency). The Court holds that the IRS’s conduct does not evince a waiver of the prior claim rule in this case. In that regard, the IRS’s form letter dated September 13, 1996, specifically recites its treatment of Plaintiffs’ “inquiry” of May 29, 1996, as a “request for abatement,” rather than as a “claim for refund.” Nor could the letter be fairly construed to consider the merits of Plaintiffs’ claim the subject of Carroll I and Carroll II that they were entitled to recover the penalties they paid because the IRS’s notice of deficiency was time-barred as a matter of law. Although the Court recognizes that the import of the IRS’s letter is considerably ambiguous, such that the Court might otherwise be free to assign to this letter “whatever meaning it deems requisite to do justice in the premises,” Southeast Bank of Orlando v. United States, 230 Ct.Cl. 277, 676 F.2d 660, 665-66 (1982), it is Plaintiffs who affirmatively contend that “the September 13, 1996 correspondence did not relate to ... penalty items covered by the Form 843 Claim for Refund.” (Pis.’ Mem. Supp. Cross-Mot. Supplement Compl. at 3; see Carroll Aff. Opp’n Mot. Dismiss Alt. Summ. J. & Supp. Cross-Mot. Supplement Compl. ¶¶ 3-4.) Because the IRS neither treated Plaintiffs’ original Form 843 as a request for refund nor considered the penalty items “on the merits” prior to Plaintiffs’ suit, the conduct of the IRS does not constitute a waiver of the prior claim rule as to the $61,391.95 request for abatement. Plaintiffs alternatively contend, relying on Crenshaw v. Hrcka, 237 F.2d 372 (4th Cir.1956), and Newton v. United States, 143 Ct.Cl. 293, 163 F.Supp. 614 (1958) (four judge panel), that their Amended Forms 843-1996 and 843-1998 cured any failure to make full payment prior to bringing a claim for refund, since “a defective claim can be cured by the filing of a proper refund claim even though the proper claim is filed beyond the statutory period,” and that under this theory, “[i]t matters not that the original claim was filed prior to the time that full payment of the amount in issue was made.” (Pis.’ Mem. Law Opp’n Def.’s Mot. Dismiss Alt. Summ. J. at 37-38); see also United States v. Kales, 314 U.S. 186, 194, 62 S.Ct. 214, 86 L.Ed. 132 (1941) (“[A] notice fairly advising the Commissioner of the nature of a taxpayer’s claim, which the Commissioner could reject because too general or because it does not comply with the formal regulations, will nevertheless be treated as a claim, where formal defects and lack of specificity have been remedied by amendment after the lapse of the statutory period”). The Court need not decide whether Amended Form 843-1996 should be construed to remedy Plaintiffs’ failure to comply with the prior claim rule with respect to payments made after June 4, 1996. Assuming without deciding that Plaintiffs’ Amended Form 843-1996 properly brings Plaintiffs’ otherwise untimely claim for refund of the additional $61,391.95 within the statutory limitation of § 6511(a), the IRS is correct that the effect of § 6511(b)(2)(B) is to limit the amount of recovery of what would otherwise be a valid claim for refund. Snyder v. United States, 616 F.2d 1187, 1188-89 (10th Cir.1980); see Oropallo v. United States, 994 F.2d 25, 27 (1st Cir.1993) (per curiam) (same conclusion regarding companion provision § 6511(b)(2)(A)). Whether the two-year “look-back” period of § 6511(b)(2)(B) is applied to the date Plaintiffs filed their original Form 843 on June 4, 1996, or to the date they filed their Amended Form 843-1996 on September 13, 1999, see Radin v. United States, 702 F.Supp. 38, 40-41 (D.Conn.1988) (applying “look-back” period of counterpart § 6511(b)(2)(A) both to date of informal claim and to date informal claim was perfected), Plaintiffs would recover none of the remaining $61,391.95. As applied to the former date, Plaintiffs’ recovery would be limited to the $20,000 that the Court has already determined they are entitled to recover; as applied to the latter, Plaintiffs would recover nothing, because they paid nothing between September 13, 1997 and September 13, 1999. Plaintiffs could only recover the $61,391.95, or a portion thereof, if the look-back window of § 6511(b)(2)(B) were applied to the date Plaintiffs filed their August 1998 Form 843 on August 19, 1998. Yet the August 1998 Form 843 does not advance any argument as to why Plaintiffs should be entitled to a refund of the $81,391.95 they paid in respect of the penalty additions. It asserts the entirely different ground that interest should be recalculated because the IRS had mis-allocated certain of Plaintiffs’ payments to penalties owed, rather than to taxes and interest. Because the relief requested in Plaintiffs’ August 1998 Form 848 is entirely different from that requested in Plaintiffs’ original Form 848, and because the IRS “is not expected to be Sherlock Holmes” in determining the basis for a claim for refund, Weisbart v. United States Dep’t of Treas., 222 F.3d 93, 99 (2d Cir.2000), the look-back period cannot be applied to the date Plaintiffs filed their August 1998 Form 843. Nor, as Plaintiffs suggest, can Amended Form 843-1998 amend the August 1998 Form 843 in such a way as to retroactively “[consolidate therewith the previously filed Claim for Refund and Request for Abatement dated May 29, 1996,” as it purports to do. As explained by the Second Circuit, “ ‘a claim seeking refund upon one asserted fact situation may not be amended out of time so as to require an investiga