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the Revenue Act of 1942, ch. 619, 56 Stat. 798. The Supreme
Court held in Manning v. Seeley Tube & Box Co., supra, that an
NOL carryback eliminated a deficiency for a prior year, but did
not eliminate the interest that accrued thereon. The Senate
Finance Committee report stated that
A taxpayer entitled to a carry-back of a net
operating loss * * * will not be able to determine the
deduction on account of such carry-back until the close
of the future taxable year in which he sustains the net
operating loss * * *. He must therefore file his
return and pay his tax without regard to such
deduction, and must file a claim for refund at the
close of the succeeding taxable year when he is able to
determine the amount of such carry-back. * * *
[S. Rept. 1631, 77th Cong., 2d Sess., at 123 (1942),
1942-2 C.B. 504, 597.]
This Court subsequently extended the principle enunciated in
C.V.L. Corp. v. Commissioner, supra, to an NOL that was carried
back to a year in which the taxpayer was subject to an addition
to tax for fraud. The Court held in Petterson v. Commissioner,
19 T.C. 486 (1952), that the original deficiency was the proper
base for computing the fraud penalty, and that the NOL carryback
did not reduce this deficiency for purposes of that computation.
This and every other Court that has considered whether an
NOL carryback reduces an underpayment for purposes of computing
a penalty or an addition to tax has concluded that the principle
expressed in C.V.L. Corp. v. Commissioner, supra, is correct;
namely, that the NOL carryback may not reduce the underpayment.
See, e.g., Arc Elec. Constr. Co. v. Commissioner, 923 F.2d 1005,
1009 (2d Cir. 1991), affg. on this issue and revg. and remanding
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