- 7 -
the 1995 tax year to 1985.7 Furthermore, when the NOL's were
carried back to 1985, business credits that initially offset the
1985 tax liability became eligible to be applied to the 1983 and
1984 tax years, creating refunds in those years.8 Specifically,
the NOL's were derived from additional interest and State taxes
resulting from the litigation of the instant case. Respondent
allowed the subsequent tentative refunds for 1983, 1984, and
1985.
Appeal of 1995 Opinion
In late 1996, petitioner appealed the Court’s valuation of
the Carnation assets and the corresponding capital gains issue to
the U.S. Court of Appeals for the Second Circuit. On December
30, 1996, respondent assessed the deficiencies redetermined by
the Court in the 1996 decision.9 On July 31, 1998, the Court of
7 Sec. 172(b)(1)(C) provides that if a taxpayer has a
“specified liability loss”, the specified liability loss can
serve as a carryback to the preceding 10 taxable years. The
definition of a specified liability loss, however, has materially
changed between 1995 (the year in which the NOL carrybacks were
generated) and today. See sec. 172(f) before and after amendment
by the Omnibus Consolidated and Emergency Supplemental
Appropriations Act, 1999, Pub. L. 105-277, sec. 3004(a), 112
Stat. 2681-905 (which applies to NOL's arising in taxable years
ending after Oct. 21, 1998).
8 A part of the refunds for 1983 and 1984 resulted from
carrying back business credits generated in 1986 and 1987.
9 The advance tax payments for 1983 and 1984 did not cover
the entire deficiency assessed for 1983 and 1984 by respondent
pursuant to the Court’s decision. In order to cover the
shortfall, respondent credited $6,226 and $1,995,285 to
(continued...)
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