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it owed, by conduct intended to conceal income, and prevent the
collection of taxes.
(e) 1980
In general, if (1) a net operating loss is carried back from
a fraud year to a nonfraud year, (2) a credit or refund is issued
to the taxpayer, and (3) the credit or refund leads to an
underpayment for the nonfraud year, then the underpayment for the
nonfraud carryback year is treated as due to the fraud of the
loss year. Toussaint v. Commissioner, 743 F.2d 309 (5th Cir.
1984), affg. T.C. Memo. 1984-25. Our holding that Toussaint is
distinguishable and the rule is otherwise if the carryback is of
a new jobs credit and the amount of the claimed credit is
nonfraudulent, was reversed. Arc Elec. Const. Co. v.
Commissioner, 923 F.2d 1005 (2d Cir. 1991), revg. T.C. memo.
1990-30. It appears that Kenmore’s entire fiscal 1980
underpayment is attributable to a carryback from Kenmore’s fiscal
1981, which may have been a carryback of a net operating loss or
of an investment or new jobs credit. Supra note 7. The parties
have stipulated that the instant cases are appealable to the
Court of Appeals for the Second Circuit, which reversed us in Arc
Elec.
Our conclusion that Kenmore’s fiscal 1981 underpayment is
due to fraud leads us to conclude that Kenmore’s fiscal 1980
underpayment also is due to fraud, whether the carryback was of a
fiscal 1981 net operating loss (Toussaint) or an otherwise
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