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on the reduced amount of $63,573.11 The parties agree that the
normal underpayment rate under section 6621(a)(1) applies from
the due date of the return for the tax year ended January 31,
1994, until December 5, 1998.12
Petitioner argues that hot interest does not apply because
the underpayment of tax for the tax year ended January 31, 1994,
was $63,573, which is below the $100,000 amount required to
trigger application of the increased interest rate. Petitioner
claims that the deficiency amount decided by this Court and then
assessed by respondent is the proper amount to use in determining
whether hot interest applies.
Respondent contends that hot interest applies because it is
undisputed that before the carryback of the NOL from the tax year
ended January 31, 1995, petitioner’s corporate income tax was
understated by $225,753. Respondent’s argument is based on the
position that an NOL carryback, regardless of whether it is
applied preassessment or postassessment, does not reduce the
amount of the underpayment for an earlier taxable period.
11The interest and penalty detail reports computing the
amount of interest owed by petitioner state that the period from
July 5, 2002, through Sept. 9, 2002, was an “interest free
period”.
12The interest computation report prepared by respondent
states that the 30-day letter date was Nov. 5, 1998. Respondent
started imposing hot interest on Dec. 5, 1998. If we decide that
there was a large corporate underpayment, then petitioner does
not challenge the use of this date as the applicable date.
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