Rev. Rul. 72-484

The purpose of the Revenue Ruling is to update and restate under the current statute and regulations, the portion of G.C.M. 26455, C.B. 1950-1, 118, that is currently applicable.

The question presented is whether penalties for failure to file a timely income tax return and pay tax should be refunded where a carryback of a net operating loss resulted in a refund of the tax paid.

A taxpayer filed a delinquent income tax return showing tax due. The tax, plus interest and penalties for the failure to file a timely return and pay tax, was assessed and collected. Subsequently, the taxpayer incurred a net operating loss carryback which resulted in a refund of the tax paid with the delinquent return. Section 6601(e) of the Internal Revenue Code of 1954 precludes credit or refund of the interest paid.

Section 6402(a) of the Code provides for the credit of an overpayment of tax against any tax liability of the person who made the overpayment and provides for the refund of any balance to such person.

Under the provisions of section 6651(a) of the Code penalties are imposed for failure to timely file a return and pay the tax shown on the return, unless such failures are due to reasonable cause and not due to willful neglect.

Even though a carryback of a net operating loss eliminates the tax for a given year, penalties incurred for failure to file a return and pay the tax for that year within the prescribed time are not affected by the carryback. See Simon et al v. Commissioner, 248 F. 2d 869 (1957).

Accordingly, it is held that the penalties may not be credited or refunded.

G.C.M. 26455 is hereby superseded, since the currently applicable position set forth therein is restated under current law in this Revenue Ruling and the position with respect to interest is covered by section 6601(e) of the Code.

¹ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.