May Seed & Nursery Co. v. Commissioner (242 F.2d 151, 1957)

JOHNSEN, Circuit Judge.

The Commissioner of Internal Revenue refused to allow May Seed & Nursery Company, of Shenandoah, Iowa, to have the benefit, under 26 U.S.C.A., Int.Rev.Code of 1939, Excess Profits Taxes, § 710, for its fiscal year 1942, of an unused excess profits tax credit carryover, from its fiscal year 1941, based on a constructive average base period net income established in 1952 between the parties under § 722 of the Code. The result was a determination of deficiency against the taxpayer for the year 1942.

The ground of the Commissioner’s refusal was that no claim for the benefit of such credit carry-over had been made in the application (or any amendment thereto) filed by the taxpayer for relief under § 722, to have a constructive average base period net income established and used in relation to its 1942 tax liability.

Treasury Regulations 109, Sec. 30.722-5, as amended July 21, 1944, contained certain procedural prescriptions, among which were the following: “(a) * * * If an unused excess profits credit for any taxable year for which an application for relief on the appropriate Form 991 has not been filed, computed on the basis of a constructive average base period net income, is to be used as an excess profits credit carry-over or carry-back, the taxpayer must file an application on Form 991 * * * for the taxable year to which such unused excess profits credit carry-over or carry-back is to be applied. The application in such case must be' filed within the period of time prescribed by section 322 for the filing of a claim for credit or refund for the taxable year to which the carry-over or carry-back is to be applied [which period under § 822 is in general 3 years from the date the taxpayer has filed his return -or 2 years from the date he has paid the tax, whichever expires later]. In addition to all other information required, such application shall * * * claim the benefit of the unused excess profits credit carry-over or carry-back. If an application on the appropriate Form 991 for the benefits of section 722 has been filed with respect to a taxable year, or if the filing -of such application is unnecessary under (d) of this section, and if the excess profits credit based upon a constructive average base period net income determined for such taxable year produces an unused excess profits credit for such year, to obtain the benefits of such excess profits •credit as an unused excess profits credit carry-over or carry-back the taxpayer should file an application upon Form 991 -x- •* * or an amendment to such application if already filed, for the taxable year to which such unused excess profits