Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 68-9

1968-1 C.B. 566

Sec. 6655

IRS Headnote

Where subsidiary corporations previously filing separate income tax returns are merged into their parent corporation, the words `tax shown on the return of the corporation for the preceding taxable year' appearing in section 6655(d)(1) of the Internal Revenue Code of 1954 refer only to the tax shown on the return of the parent corporation.

Full Text

Rev. Rul. 68-9

Advice has been requested concerning the exception to the imposition of the addition to the tax provided by section 6655(d)(1) of the Internal Revenue Code of 1954 under the circumstances described below.

Corporation % iX owned a majority of the authorized and outstanding stock of corporations Y and Z . Each corporation has in the past filed its own Federal income tax return, Form 1120. Corporations Y and Z were merged into corporation X at the close of business December 31, 1967, and their operations were continued as divisions of corporation X after that date. The transaction was a statutory merger and not a consolidation involving the absorption of all three corporations by a new corporation.

The specific question asked is whether it is necessary for corporation X , in filing its declaration of estimated income tax for 1968, to consider the tax shown on the separate income tax returns of corporations Y and Z for year 1967 in determining the applicability of section 6655(d)(1) of the Code.

Section 6655(a) of the Code provides in case of any underpayment of estimated tax by a corporation, except as provided in subsection (d), there shall be added to the tax under chapter 1 for the taxable year an amount determined at the rate of 6 percent per annum upon the amount of the underpayment (determined under subsection (b)) for the period of the underpayment (determined under subsection (c)). Section 6655(d)(1) of the Code provides an exception to the imposition of the addition to the tax for underpayment of estimated tax which is based on `the tax shown on the return of the corporation for the preceding taxable year' reduced by $100,000. The return for the preceding taxable year must show a tax liability and must cover a taxable year of 12 months.

Under the above circumstances, it is held that the words `tax shown on the return of the corporation for the preceding taxable year' appearing in section 6655(d)(1) of the Code refer only to the tax shown on the 1967 return of corporation X .