Rev. Rul. 60-200

Advice has been requested whether an addition to the tax for the underpayment of estimated tax as provided in section 6655(a) of the Internal Revenue Code of 1954 may be asserted against a corporate taxpayer under the facts and circumstances described below.

The taxpayer, a corporation, files its Federal income tax return on a fiscal-year basis. It incurred a loss for the past fiscal year and its Federal income tax return for that year reported no taxable income. For the present fiscal year, however, the corporation will have taxable income. Accordingly, it paid the first installment on its estimated tax computed pursuant to the provisions of section 6655(d)(3) of the Code.

The taxpayer corporation contends that since it had no taxable income during its prior fiscal year it would not be subject to the addition to the tax for failure to pay estimated tax during its present fiscal year, although it will have taxable income. The taxpayer also contends that although it voluntarily paid a first installment of estimated tax during the present fiscal year, the addition to the tax provided in section 6655(a) of the Code should not be asserted in the event that no further installments are paid, because the exception provided in section 6655(d)(2) of the Code would seem to control.

Section 6655(a) of the Code provides that in case of any underpayment of estimated tax by a corporation, except as provided in subsection (d), there shall be added to the tax for the taxable year an amount determined at the rate of six percent per annum upon the amount of the underpayment. Section 6655(d)(2) of the Code provides that notwithstanding the provisions of section 6655(a) of the Code, the addition to the tax with respect to any underpayment of any installment shall not be imposed if the total amount of all payments of estimated tax made on or before the last date prescribed for the payment of such installment equals or exceeds the amount which would have been required to be paid on or before such date if the estimated tax were an amount equal to the tax computed at the rates applicable to the taxable year but otherwise on the basis of the facts shown on the return of the corporation for, and the law applicable to, the preceding taxable year.

Since all corporations, unless specifically exempt under section 6012(a)(2) of the Code, must make a return regardless of the amount of taxable income and regardless of whether any tax is due on such income, the exception from an addition to the tax set forth above is applicable and the addition to the tax provided in section 6655(a) of the Code will not be asserted against the corporation for failure to pay estimated tax during its present fiscal year although it will have taxable income in this period.

Accordingly, it is held that notwithstanding the voluntary payment by the corporation of an installment of estimated tax for the present fiscal year, since the prior year's return reflects no taxable income the addition to the tax provided for in section 6655(a) of the Code will not be asserted although no further installments are paid. See Rev. Rul. 58-369, C.B. 1958-2, 894.