1952 U.S. Tax Ct. LEXIS 17">*17
Original deficiency in income tax liability
19 T.C. 486">*486 OPINION.
A deficiency for 1947 in addition to tax on account of fraud in the amount of $ 4,475.32 is the sole controversy. There 19 T.C. 486">*487 is no question as to the existence of fraud and the sole issue is one of law. It is whether the amount of the 50 per cent fraud penalty is to be computed on the original deficiency or on the smaller sum admittedly reduced by a net loss carry-back from a subsequent year.
All of the facts have been stipulated and are hereby found accordingly. Petitioners' returns for 1947 and for 1949, the net-loss year, were filed with the collector for the district of Utah. The computations of the fraud penalty on the conflicting theories presented, as stipulated, are as follows:
| Computation of Deficiency -- 1947 | ||
| Before carryback | After carryback | |
| loss | loss | |
| Net income | $ 48,169.15 | $ 34,209.77 |
| Less exemptions | 2,500.00 | 2,500.00 |
| Income subject to normal tax and surtax | $ 45,669.15 | $ 31,709.77 |
| Tentative combined normal tax and surtax | 23,701.79 | 14,280.06 |
| Less 5 per cent reduction | 1,185.09 | 714.00 |
| Total income tax | 22,516.70 | 13,566.06 |
| Income tax liability per return | 2,076.71 | 2,076.71 |
| Deficiency | $ 20,439.99 | $ 11,489.35 |
| 50 per cent penalty -- Sec. 293 (b), I. R. C. | $ 10,219.99 | $ 5,744.67 |
1952 U.S. Tax Ct. LEXIS 17">*18 Although the question is novel in the Tax Court, the precise problem was disposed of in
