BLANTON COAL COMPANY, INC. v. Commissioner
| Decision Date | 30 July 1984 |
| Docket Number | Docket No. 18560-81. |
| Citation | 1984 TC Memo 397,48 TCM (CCH) 670 |
| Parties | Blanton Coal Company, Inc. v. Commissioner. |
| Court | U.S. Tax Court |
William A. Watson, P.O. Box 1340, Middlesboro, Ky., for the petitioner. Frederick W. Krieg, for the respondent.
This case was submitted fully stipulated and the stipulation and supplemental stipulation of facts are incorporated by this reference. Blanton Coal Company, Inc. (hereinafter "petitioner"), was located at Harlan, Kentucky, at the time of the filing of its petition. No Federal corporate income tax returns were filed for petitioner for the calendar years 1956 through 1977. The parties have agreed upon the amount of taxable income for each of the taxable years 1956 through 1975 and the amounts of net operating loss carryback deductions and/or carryback credits from 1976 to 1973 and from 1977 to 1974 and 1975. Respondent by a statutory notice of deficiency, dated April 23, 1981, has asserted additions to the tax as follows:
Additions to Tax
Taxable Sec. Sec. Sec
Year Ended 6651(a)(1)1 6653(a) 6655
Dec. 31, 1956 ... $ 287.32 $ 57.46 $
Dec. 31, 1957 ... 287.32 57.46
Dec. 31, 1958 ... 287.32 57.46
Dec. 31, 1959 ... 287.32 57.46
Dec. 31, 1960 ... 287.32 57.46 .....
Dec. 31, 1961 ... 287.32 57.46 .....
Dec. 31, 1962 ... 287.32 57.46 .....
Dec. 31, 1963 ... 287.32 57.46 .....
Dec. 31, 1964 ... 210.70 42.14 .....
Dec. 31, 1965 ... 210.70 42.14 .....
Dec. 31, 1966 ... 89.07 17.81 .....
Dec. 31, 1969 ... 144.27 28.85 .....
Dec. 31, 1970 ... 215.96 43.19 .....
Dec. 31, 1971 ... 210.70 42.14 .....
Dec. 31, 1972 ... 438.56 87.71 .....
Dec. 31, 1973 ... 10,351.14 2,070.23 1,073.12
Dec. 31, 1974 ... 17,547.17 3,509.43 1,808.47
Dec. 31, 1975 ... 55,502.59 11,100.52 8,704.43
__________ __________ __________
$87,219.42 $17,443.84 $11,586.02
Petitioner has not contested the additions to tax under section 6655. Additionally, petitioner admits that any underpayment or tax to be shown on a return for the taxable years 1956 through 1966 and 1969 through 1975 was due to negligence or intentional disregard of the rules and regulations under section 6653(a) and failure to file returns was not due to reasonable cause under section 6651(a)(1).
The issues remaining for decision are: (1) Whether a net operating loss carryback or an investment tax credit carryback may be used to reduce an underpayment or the tax that would have been shown on a return before application of additions to tax under either section 6653(a) or section 6651(a)(1); and (2) whether there can be an addition to tax under both sections 6651(a)(1) and 6653(a) for the same taxable year.
The pertinent portions of section 6651 (a)(1) and 6653(a) provide for additions to tax as follows:
Petitioner argues that the predecessor to section 6651 (section 291 of the Internal Revenue Code of 1939) "did not specify that the penalty for failure to file a return would be assessed against the net tax ultimately determined to be due" and in enacting section 6651 "on the basis of the net tax due after all credits have been applied," Congress intended to permit reductions of the tax until a return was finally filed. Petitioner finds support for its position in section 6651 and the legislative history underlying the enactment of section 6651. We agree with petitioner's position to the extent the "netting" of the tax is attributable to payments, deductions or credits which were "paid on or before the date prescribed for payment" or which would have been available when a return was due to be filed. We decline to interpret the phrase "tax required to be shown on the return shall be reduced * * * by the amount of any credit against the tax which may be claimed on the return" in section 6651 (b)(1) as referring to a return, no matter when filed. To do so would confer a benefit upon those who were the most delinquent in failing to file.
We note that petitioner has not advanced the same argument in connection with section 6653(a), since that section and the definition of a "deficiency" contained in section 6211 would not permit the same type of interpolation used in petitioner's argument in connection with section 6651. Moreover, it is difficult for us to understand how petitioner would reconcile the time-sensitive nature of this addition to tax with the possibility of eliminating its application by an additional passage of time or the occurrence of an event which was unknown at the time a return was due. In considering a similar issue concerning whether a tax deficiency, reduced by a net operating loss carryback, would bear interest, the Supreme Court explained:
To sustain taxpayer's contention would be to place a premium on failure to conform diligently with the law. For then a taxpayer who did not pay his taxes on time would receive the full use of the tax funds for the intervening period, while the taxpayer who did obey the statutory mandate and pay his lawful taxes promptly would be prohibited by § 3771(e) from having the use of the money for that period. We cannot approve such a result. Manning v. Seeley Tube & Box Co. of New Jersey 50-1 USTC ¶ 9163, 338 U.S. 561, 568 (1950).
The basic principle to be found in prior case law would permit reduction for carry-forward loss deductions and credits, but prohibit carryback loss deductions and credits, when computing additions to tax. This Court refused to permit "carryback reductions" in cases involving the computation of civil fraud, negligence and delinquency additions under the Internal Revenue Code of 1939. C.V.L. Corp. v. Commissioner Dec. 18,628, 17 T.C. 812 (1951); Auerbach Shoe Co.v. Commissioner Dec. 19,972, 21 T.C. 191 (1953), affd. 54-2 USTC ¶ 9673 216 F. 2d 693 (1st Cir. 1954); Rictor v. Commissioner Dec. 21,879, 26 T.C. 913 (1956); Pusser v. Commissioner Dec. 18,695(M), a Memorandum Opinion of this Court dated Dec. 7, 1951, affd. 53-2 USTC ¶ 9508 206 F. 2d 68 (4th Cir. 1953). We applied the same principle to a 1954 Code case concerning a net operating loss carryback and a late filing addition to tax under section 6651(a). Texas Mobile Home Association v. Commissioner Dec. 25,467(M), T.C. Memo. 1962-95, revd. on another issue 63-2 USTC ¶ 9831 324 F. 2d 691 (5th Cir. 1963). In a criminal tax fraud case, a net operating loss carryback did not mitigate the "fraud" by reduction or elimination of the deficiency in the "fraudulent" tax year. United States v. Keltner 82-1 USTC ¶ 9305, 675 F. 2d 602 (4th Cir. 1982), cert. denied 459 U.S. 832 (1982).
Since 1953 the Commissioner has publicly expressed the position that additions to tax (negligence, delinquency and civil fraud) may not be eliminated or refunded based upon net operating loss carrybacks. See Rev. Rul. 173, 1953-2 C.B. 227; Rev. Rul....
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