Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 55-29

1955-1 C.B. 413

Sec. 6654

IRS Headnote

Additions to the tax imposed under section 294(d) of the Internal Revenue Code of 1939 should not be disturbed by the application of a relief provision such as a net operating loss carryback.

Full Text

Rev. Rul. 55-29

Advice has been requested whether the additions to the tax imposed under section 294(d) of the Internal Revenue Code of 1939 are affected by the application of a relief provision such as a net operating loss carryback.

In John E. Manning v. Seeley Tube and Box Company , 338 U.S. 561, Ct. D. 1729, C.B. 1950-1, 113, the court held that while a net operating loss carryback may serve to eliminate a deficiency for a previous year, the interest which had theretofore accrued on such deficiency was not eliminated. In holding that the Government was entitled to interest, the court concluded that there was a real deficiency existing prior to the occurrence of the carryback loss and the right to interest is dependent upon the existence of a deficiency.

In G.C.M. 26455, C.B. 1950-1, 118, it is held that interest and penalties assessed and collected in connection with a Federal income tax liability should not be credited or refunded even though such tax liability is reduced or eliminated by net operating loss carrybacks. Revenue Ruling 173, C.B. 1953-2, 227, similarly holds that an ad valorem penalty (negligence, delinquency, or fraud) based upon the amount of a deficiency existing prior to the application of a relief provision such as a net operating loss carryback is to be imposed in connection with a Federal income tax liability, even though the tax as reported in the original return is equal to or in excess of the correct tax as finally determined after the application of such provision. These rulings follow the rationale of the Seeley Tube and Box Company case. As was pointed out in G.C.M. 26455, `The statutory pattern requiring prompt payment of taxes was the foundation of the opinion in the Seeley Tube and Box Company case. The requirement of prompt filing of returns is equally a statutory duty of a taxpayer. The carryback provisions of the Code do not modify that duty.'

The filing of a declaration of estimated tax and the payment of installments of estimated tax declared are likewise statutory duties of a taxpayer. Section 294(d) of the Code imposes additions to tax in certain cases where the taxpayer has failed to perform such duties. It is believed the reasoning of the above-cited case and rulings is equally applicable to a case where additions to tax have been imposed by that section. Accordingly, it is held that the additions to the tax properly imposed under section 294(d) of the Code should not be disturbed by the application of a relief provision such as a net operating loss carryback