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I. Kolonaki
Kolonaki asserts that it was the beneficial owner of JAI
stock and was entitled to deduct a $1,580,458 net loss from JAI
on its 1990 Form 1120 tax return. Respondent contends that
Kolonaki was not the beneficial owner of JAI stock and,
therefore, not entitled to include JAI on its consolidated
return. Respondent acknowledges that beneficial ownership would
satisfy the ownership requirement of section 1504(a). Respondent
argues, however, that there was no credible documentation to
substantiate Kolonaki's beneficial ownership of JAI, only
documents that were created or altered and backdated after the
audits began.
Kolonaki's right to file a consolidated return depends on
whether, during the year in issue, Kolonaki "owned directly",
within the meaning of section 1504, at least 80 percent of the
voting power of all classes of JAI stock. Under section 1501, an
affiliated group has the privilege of making a consolidated
return. An affiliated group is defined in section 1504(a) as
follows:
(a) Affiliated Group Defined.--For purposes of
this subtitle--
(1) In general.--The term "affiliated group"
means--
(A) 1 or more chains of includible
corporations connected through stock
ownership with a common parent corporation
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