Rev. Rul. 56-413

Advice has been requested whether interest is allowable on refunds of income tax for the taxable years ending in 1953 and 1952, resulting from a net operating loss carryback from a taxable year ending in 1954, in cases where a claim for refund, based upon the net operating loss carryback, was filed only for the taxable year ending in 1953.

In the instant case, the taxpayer sustained a net operating loss for the taxable year ending June 30, 1954. On July 25, 1954, he filed a claim for refund of income tax for the taxable year ended June 30, 1953, attributable to the net operating loss carryback, but did not file a corresponding claim for the taxable year ended June 30, 1952.

Section 3771(e) of the Internal Revenue Code of 1939 provides, in effect, that no interest shall be allowed or paid on any part of an overpayment attributable to a net operating loss carryback for any period prior to the filing of a claim for credit or refund of such part of the overpayment.

Section 6611(f) of the 1954 Code, corresponding to section 3771(e) of the 1939 Code, provides in effect, that, if any overpayment of tax results from a carryback of a net operating loss, interest shall be allowed and paid upon the overpayment of tax; but, such overpayment shall be deemed not to have been made prior to the close of the taxable year in which such net operating loss arises.

Section 172(b) of the 1954 Code provides that a net operating loss for any taxable year ending after December 31, 1953, may be a carryback to each of the two taxable years preceding the year of such loss. In the case of a year beginning in 1953 and ending in 1954, the loss is prorated to the second preceding year according to section 172(f) of the 1954 Code.

Under section 7851(a)(6)(A) of the 1954 Code, the general rule as to the application of the revenue laws is that the provisions of subtitle F of the 1954 Code shall take effect on the day after the date of enactment of the 1954 Code and shall be applied with respect to any tax imposed by the 1954 Code. That subtitle includes the subchapter entitled `Interest on Overpayments' of which section 6611(f), supra , is a part. (The 1954 Code was enacted on August 16, 1954.) Section 7851(a)(6)(A) provides also that the provisions of subtitle F shall apply with respect to any tax imposed by the 1939 Code only to the extent provided in subparagraphs (B) and (C) of paragraph (a)(6) of that section. Because the taxes here in question were not imposed by the 1954 Code and as subparagraphs (B) and (C) do not provide that the provisions of subtitle F relating to interest on overpayments shall apply with respect to any tax imposed by the 1939 Code, the provisions of the 1939 Code continue to apply with respect to the allowances of interest on overpayments of tax imposed by that Code. Compare Rev. Rul. 55-22, C.B. 1955-1, 198.

Accordingly, it is held that where a net operating loss is sustained in a taxable year ending in 1954 and is carried back to taxable years with respect to which the tax is imposed by the Internal Revenue Code of 1939, interest on overpayments of income tax attributable to the carry-back may be allowed only for the taxable year or years for which a claim for refund is filed. Interest may not be allowed on the overpayment attributable to that portion of the net operating loss which may be carried back to the second preceding taxable year, in accordance with section 172(f) of the Internal Revenue Code of 1954, if no claim was filed for the refund of the overpayment made for that year. It is immaterial whether the claim for refund of the overpayment made for the first preceding taxable year was filed before or after the effective date of the 1954 Code.