Rev. Rul. 78-256

Advice has been requested whether an "amended" return filed on or before the due date of the return (including extensions) is the return of the taxpayer for purposes of section 6655(b) of the Internal Revenue Code of 1954, in order to determine the amount of underpayment of estimated tax for the taxable year in question.

Corporation X was organized and commenced operations on January 1, 1976. On March 14, 1977, Corporation X filed a Form 7004, Application for Automatic Extension of Time to File U.S. Corporation Income Tax Return, extending the time to file its calendar year 1976 Federal income tax return from March 15, 1977, to June 15, 1977. Corporation X filed its 1976 return on April 11, 1977, showing a liability of 7x dollars. The tax liability shown on that return was paid when the return was filed. Subsequently, X discovered an error on its return. To correct the mistake, X filed Form 1120X, Amended U.S. Income Tax Return, on April 15, 1977. The tax liability shown on the amended return was 1x dollars. Corporation X made no payments of estimated taxes for the year 1976.

Section 6655(a) of the Code provides that in the 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 an annual rate established under section 6621 upon the amount of the underpayment for the period of the underpayment.

Section 6655(b) of the Code provides that, for purposes of section 6655(a), the amount of the underpayment shall be the excess of (1) the amount of the installment that would be required to be paid if the estimated tax were equal to 80 percent of the tax shown on the return for the taxable year or, if no return was filed, 80 percent of the tax for such year, over (2) the amount, if any, of the installment paid on or before the last date prescribed for payment.

In Hagger Co. v. Helvering, 308 U.S. 389 (1940), 1940-1 C.B. 237, the taxpayer filed a return before the original due date. The date for filing returns was extended and the taxpayer filed an amended return within the period of the extension. The Supreme Court held that "A timely amended return is as much a 'first return' . . . as a single return filed by the taxpayer . . .".

Accordingly, X's amended return timely filed April 15, 1977 (the last return filed on or before the due date, including extensions, for the filing of such return), is X's return for 1976 for purposes of section 6655(b) of the Code.

Therefore, in determining the amount of underpayment of estimated tax because X failed to pay estimated tax for the taxable year 1976, the "tax shown on the return for the taxable year" referred to in section 6655(b) is the 1x dollars shown on X's 1976 amended return timely filed on April 15, 1977.

The conclusion of this revenue ruling is equally applicable to section 6655(d)(1) of the Code.