Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 73-82

1973-1 C.B. 375

Sec. 1311
Sec. 1312
Sec. 1313
Sec. 1314
Sec. 6511

IRS Headnote

The effect of an unused investment credit erroneously applied on returns filed within the statute of limitations period may be corrected under sections 1311 through 1315 of the Code for the appropriate carryback years otherwise barred by the statute of limitations.

Full Text

Rev. Rul. 73-82

Advice has been requested whether sections 1311 through 1315 of the Internal Revenue Code of 1954 apply to the situation described below so as to allow an unused investment credit erroneously carried forward to be carried back to the proper taxable year(s) which years are otherwise barred by the statute of limitations.

For the taxable year 1967, a corporate taxpayer using the calendar year as its taxable year was entitled to an investment credit, computed under section 46 of the Code, in the amount of 200x dollars. The 200x dollars of investment credit was not used for the taxable year 1967 because the taxpayer had no taxable income for that year. The taxpayer claimed and used up the 200x dollars of investment credit on its tax returns filed for the taxable years 1968 and 1969.

As a result of examination of the taxpayer's 1969 tax return which was begun sometime after April 15, 1971, the carryover of the unused investment credit from 1967 was disallowed for both the 1968 and 1969 taxable years because the unused credit had not been carried back three years as required by section 46(b) of the Code. Thereafter a determination was made as specified in section 1313(a) of the Code. All of the unused credit (200x dollars) would have been used in taxable years 1964, 1965, and 1966, if it had been properly carried back to those years.

Section 1311(a) of the Code sets forth the general rule that in order for the effect of an error in computing a taxpayer's income tax liability to be adjusted under the provisions of sections 1311 through 1314 of the Code, there must be a determination as defined in section 1313(a) of the Code (and described in one or more paragraphs of section 1312 of the Code) and that on the date of such determination correction of the error is barred by operation of the statute of limitations.

Section 1311(b)(2)(B) of the Code further provides that if the determination was a disallowance of a deduction or credit which should have been allowed to, but was not allowed to the taxpayer for another taxable year, as described in section 1312(4) of the Code, then correction of the error can be made only if credit or refund of the overpayment attributable to the deduction or credit which should have been allowed to the taxpayer was not barred by operaton of the statute of limitations at the time that the taxpayer first maintained in writing that he was entitled to such deduction or credit for the taxable year to which the determination relates.

In the instant case, the unused 1967 investment credit was claimed, though erroneously, as a carryover on the taxpayer's 1968 and 1969 tax returns. At that time since taxable year 1967 was not barred by the statute of limitations, taxable years 1964, 1965, and 1966 were similarly not barred by the statute of limitations under section 6511(d)(4)(A) of the Code. Accordingly, since taxable years 1964, 1965, and 1966 were not barred by the statute of limitations at the time taxpayer first maintained in writing his claim for the unused investment credit, sections 1311-1315 of the Code are applicable to allow a correcting carryback of the unused investment credit to the taxpayer's 1964, 1965, and 1966 taxable years, the years in which the unused investment credit should have been claimed.

In computing the amount of the adjustment allowed pursuant to the above holding sections 1311 through 1315 of the Code are applicable solely to correct the effect of the erroneous treatment of the unused investment credit.