Regina Felton, PC - Page 4

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          incorporated petitioner as a New York professional corporation.3            
          Since petitioner’s incorporation, Ms. Felton has been its sole              
          shareholder, holding 100 percent of the corporation’s shares.  At           
          all relevant times, the sole activity engaged in by petitioner              
          was the rendering of legal services.  Since 1989, Ms. Felton has            
          been petitioner’s sole practitioner providing those services.               
          Petitioner employs a minimal secretarial and/or clerical staff.             
               Since 1987, petitioner’s certified public accountant,                  
          Raymond Saylor (Mr. Saylor), has prepared petitioner’s corporate            
          income tax returns.  For the years in issue, Mr. Saylor                     
          calculated petitioner’s tax based on the graduated tax rate for             
          corporations under section 11(b)(1).4  In addition, Mr. Saylor              
          prepared a Form 7004, Application for Automatic Extension of Time           
          to File Corporation Income Tax Return (extension request), for              
          petitioner’s calendar year 2002 income tax return and delivered             

               3  Attorneys are not permitted to incorporate as traditional           
          corporations under New York State law.  See N.Y. Jud. Law sec.              
          495(1) (McKinney 2006); see also In re Co-operative Law Co., 92             
          N.E. 15 (N.Y. 1910).  Rather, to incorporate a law firm, the                
          professional corporation provisions must be followed.  See N.Y.             
          Bus. Corp. Law sec. 1503 (McKinney 2006).                                   
               4  Sec. 11(b)(1) imposes a tax on the taxable income of                
          every corporation as follows:                                               
                    (A) 15 percent of so much of the taxable income as does           
               not exceed $50,000,                                                    
                    (B) 25 percent of so much of the taxable income as                
               exceeds $50,000 but does not exceed $75,000,                           
                    (C) 34 percent of so much of the taxable income as                
               exceeds $75,000 but does not exceed $10,000,000, and                   
                    (D) 35 percent of so much of the taxable income as                
               exceeds $10,000,000.                                                   





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