CCA 200910053: A disallowed fuel tax credit increased the deficiency dollar for dollar

Plain-English summary

Chief Counsel explained how claimed section 34 fuel tax credits enter the section 6211 deficiency calculation. The tax shown on the return reflects the claimed credits, but section 6211(b)(4) is what permits that amount to become negative when credits exceed the liability. In the example, a $1,000 liability and $2,000 claimed credit produced negative $1,000 of tax shown, so determining $1,000 of tax with no allowable credit created a $2,000 deficiency. Because the tax imposed did not include the section 4041 amount, the resulting deficiency equaled the disallowed fuel tax credit.

Ruling snapshot

• Question: How do excess claimed fuel tax credits affect the section 6211 deficiency calculation?
• Outcome: Advice given: section 6211(b)(4) makes tax shown negative, causing the deficiency to include the full disallowed credit.
• Key authorities: IRC §§ 34, 4041, and 6211(b)(4).

Full text (IRS public release)

ID: CCA_2009011409072347 Number: 200910053
Release Date: 3/6/2009
Office: ---------
UILC: 6211.00-00

From: ----------------------
Sent: Wednesday, January 14, 2009 9:07:24 AM
To: ---------------
Cc:
Subject: RE: 6211(b)(4) question

Adding to our phone conversation, here's the piece we were missing:

"Tax shown on return" does include consideration of claimed section 34 fuel tax credits, but that number only goes negative when section 6211(b)(4) is applicable. To demonstrate: assume the tax liability without the credits is $1,000 and the fuel credits are $500. The "tax shown on return" is therefore $500. Now assume the tax liability is $1,000 but the claimed credits are $2,000. Before considering section 6211(b)(4), the "tax shown on return" would be zero - the extra credits would sort of disappear. It's only because of the operation of section 6211(b)(4) that "tax shown on return" is actually a negative 1,000. If the service determined the tax to be $1000 and the correct credit as zero, the deficiency would be $1,000

• (-1,000), or $2,000.

Because the "tax imposed" doesn't include the section 4041 amount, we're left with a deficiency that's the amount of the disallowed fuel tax credit.

That was a great question - thanks for giving me the time to work it out.

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