Effect of superseding returns.

• Author: Smith, Annette B.
• Position: Tax returns

If a taxpayer files two returns for the same period on or before the due date, the IRS generally will consider the second return filed as the original return; see IRM 120.1.3.2.7 and Rev. Ruls. 78-256 and 83-36. For example, if a calendar-year corporate taxpayer files an income tax return on February 1 and then files a second return on March 15, the March 15 return will supersede the February 1 return. The Service treats the last corporate return filed on or before March 15 as "the return" for all Code purposes.

The question arises, however, as to whether the IRS would adopt a similar position for a second return filed pursuant to a properly filed extension. Put simply, does a return filed by a calendar-year corporate taxpayer on or before September 15 pursuant to an extension supersede a return previously filed on July 15? The answer to this question could affect the manner in which a taxpayer chooses to elect certain types of tax treatment not included in the original filing.

Supreme Court Decision

In Haggar, 308 US 389 (1940), the Supreme Court seemingly addressed this issue. The taxpayer in that case filed a second return during the extension period, correcting a capital-stock valuation. The National Industrial Recovery Act of 1933 required corporations to pay an excess-profits tax based on a capital stock's declared value. The declaration had been reported on the corporation's first return after the close of its tax year. The value reported on the second return was greater than that reported on the first return.

The Service argued that the statute's language precluded a company from reporting a value for the stock other than that reported on the "first return." The Supreme Court held that the statutory phrase "first return" meant a return for the first year that the taxpayer fixed the stock's value; thus, the term also included a second return filed within the filing period (including extensions).

The following year, the Supreme Court emphasized its focus on the second return's timing when it considered a slightly different fact pattern. In Scaife Co., 314 US 459 (1941), the Court did not allow a taxpayer to amend the declared value of its capital stock because the taxpayer had failed to file a request to extend the time for filing the return. Thus, the original due date for filing the declaration had expired at the time the taxpayer attempted to correct the capital stock value. The Court distinguished this case from Haggar on the...