Blown NOL Election Leads To Interest Tack-On.

The petitioners, a married couple, incurred a large net operating loss (NOL) that they wanted to carry forward.  However, they didn't timely file the necessary election to do so in accordance with I.R.C. Sec. 172(b)(1) and (3) (forego the two-year carryback to be able to carry forward).  Upon asking IRS what they should do, IRS informed them to amend the return to carryback the NOL and then carry it forward.  The petitioners did so and then wanted the IRS to credit the balance of the NOL forward.  However, the IRS simply refunded the balance of the NOL to the petitioners.  As a result, the petitioners had a tax deficiency for the following year and got assessed interest.  Upon consulting the taxpayer advocate, the petitioners were told that it was their problem and that IRS did not err.  The court noted that taxpayers owe underpayment interest beginning on "the last date prescribed for payment", which is the due date of the return (Apr. 15 of the following year) without regard to whether a return is actually filed.  The court also noted that IRS does not owe interest on an overpayment before the return is filed.  In this case, the court noted that the IRS did not owe interest because the return was deemed untimely filed and the IRS refunded the overpayment within 45 days after the return is filed, citing I.R.C. Sec. 6611(e)(1).  As for the IRS "advice," the court noted that the IRS was not acting in a "ministerial" or "managerial" fashion and, thus, interest abatement was not possible.  Larkin v. Comr., T.C. Memo. 2014-195.