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Apparently, in accordance with the above manual provisions,
the original Form 2553 was returned to NTI with a Letter 312C
dated April 9, 1991, from Beverly J. Baker, Chief of the
Correspondence Section at the Service Center. In that letter Ms.
Baker: (1) Acknowledged receipt of the Form 2553; (2) advised
the corporation that the form could not be processed without the
"Beginning date of the tax year for which * * * the election [is
intended] to take effect"; (3) granted NTI 30 days from the date
of the letter to complete and return the form; and (4) indicated
that if a response was not received within that period, the
election "may be treated as made for the following taxable year."
Respondent did not keep any permanent records that reflect
receipt of the Form 2553 on March 18, 1991, or that indicate the
April 9, 1991, letter had been sent to NTI returning the original
Form 2553. On behalf of NTI, Mrs. Dugan received the April 9,
1991, letter and NTI's Form 2553; however, she did not
immediately notify Mr. Frey or Ms. Tidwell of the situation, nor
did she immediately complete and return the Form 2553 or
otherwise respond to the letter.
On June 8, 1992, Mrs. Dugan filed a 1991 S corporation
Federal income tax return, Form 1120S, for NTI. On June 16,
1992, the Dugans filed their 1991 joint Federal income tax return
on which they claimed a passthrough loss deduction of $177,522
from NTI. The passthrough loss deduction generated a net
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Last modified: May 25, 2011