Ezel / IRS Rulings / 200940022

CCA 200940022: Accuracy-related penalties may apply to underpayments in loss carryback years

Number
200940022
Outcome
Advice
Document type
Chief Counsel Advice
IRS subject
Accuracy-related penalty
Topics
Procedure, penalties, and administration
Code sections
§ 6662, § 6664
Ruling dated
August 13, 2009
Publicly released
October 2, 2009
Source
View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2009, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2009
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

This Chief Counsel Advice explains how an accuracy-related penalty can apply when a loss is carried back or carried over to other tax years. The advice says the relevant question is whether an underpayment exists under IRC § 6664, rather than whether there is a deficiency. A penalty may apply to some or all of the years receiving the loss, but each year must be examined separately and the underpayment must be attributable to a valuation misstatement in the year the loss arose. The advice also discusses a tentative carryback adjustment that produced a refund.

Ruling snapshot

  • Question: When can an accuracy-related penalty apply to tax years affected by a loss carryback or carryover?
  • Outcome: Advice given.
  • Key authorities: IRC §§ 6662 and 6664; Treas. Reg. § 1.6662-5(c)(1).

Full text (IRS public release)

ID: CCA_2009081310470241 Number: 200940022
Release Date: 10/2/2009
Office: ----------
UILC: 6662.00-00

From: -------------------
Sent: Thursday, August 13, 2009 10:47:04 AM
To: -----------------
Cc:
Subject: RE: Stat notice and carryback

Hi --------

The application of an accuracy related penalty depends upon the existence of an underpayment (as defined in section 6664), not a deficiency. The penalty would apply to any portion of an underpayment for a year to which the loss is carried that is attributable to a valuation misstatement for the year in which the carryback/over of the loss arises. See 1.6662-5(c)(1). This means that the penalty could apply to any or all of the years the loss is carried to (look at each year separately), so long as there is an underpayment in those years. See the explanation in FSA 2001 WL 4999971, discussing the court's holding in Pesch v. CIR, 78 TC 100, where a tentative carryback adjustment resulted in a refund, and the TC held that the refund was a "rebate." (The FSA makes a connection between "rebate" defined for purposes of deficiency and underpayment).

Let me know if you want to discuss.

----------------------------

What does the Code say today, for your facts?

This advice was written for IRS staff and cannot be cited. Ezel checks the current Internal Revenue Code and IRS guidance against your situation, with citations.

Opens in Ezel Pro.

  • Checks the law as it stands today, not only this page
  • Cites every source it relies on, so you can verify it
  • Chat, drafting and research in one workspace