Tax Type
Corporation Income Tax
Description
Deficiency assessment; I. R. S. adjustments
Topic
Collection of Delinquent Tax
Date Issued
08-24-1992
August 24, 1992
Re: §58.1-1821 Application; Corporation Income Tax
Dear****************
This will respond to separate applications for correction of erroneous assessments of corporation income tax against*************(the Taxpayer) that were filed by the President of the Taxpayer and by the Trustee to whom assets of the Taxpayer have been conveyed.
FACTS
The President caused a consolidated Virginia corporation income tax return to be filed for the Taxpayer's fiscal year ended 7/85. None of the tax due was paid because the assets were then in the hands of the Trustee, who refused to pay. No returns have been prepared or filed for any subsequent taxable year.
The I.R.S. issued a preliminary audit report for the taxable year ended 7/86 and subsequent years. Based upon this preliminary report and an audit of the consolidated return for F.Y.E. 7/85, the Department issued assessments of Virginia tax, penalty and interest. Both the President and the Trustee objected to certain aspects of these assessments. The I.R.S. has recently issued a final Revenue Agent's Report and the Department has correspondingly revised its assessments. The President no longer objects to any portion of the assessments. The only remaining objections are those raised by the Trustee, which will be addressed in order.
DETERMINATION
Companies included in the Virginia consolidated return; apportionment
In administrative and judicial proceedings an assessment of taxes is deemed prima facia correct. See Va. Code §58.1-205. An applicant seeking to correct an assessment must present sufficient evidence to overcome the presumption of correctness. He cannot meet this burden merely by showing that errors have been made in the assessment unless he also shows what the correct tax should be. The Trustee did not object to the return when filed, and the period for filing an amended return has expired. Neither the President nor the Trustee have provided any data that would indicate that the assessment is incorrect.
Federal Revenue Agent Report Adjustments
The I.R.S. has now issued its final report and Virginia's assessments have been adjusted accordingly. With reference to the specific items you mention, certain losses were denied in the final report. Therefore, unless and until the I.R.S. allows these losses they cannot be taken in computing Virginia taxable income. Examination of the audit report shows that the Taxpayer's portion of a partnership loss for F.Y.E. 7/85 was taken into account. The final Virginia audit report also adjusts the available net operating loss deduction for F.Y.E. 7/85 based on information in the final I.R.S. report.
CONCLUSION
Enclosed with this letter is a copy of the revised audit report with interest accrued through July. As stated above, I find that the President has withdrawn his objections to this report and that the Trustee has not provided sufficient evidence to overcome the statutory presumption of correctness that attaches to an assessment of taxes. Therefore, the assessments, as adjusted, are upheld and are now due and payable.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner