105 T.C. No. 25
UNITED STATES TAX COURT
JOHN M. CAMERON AND CAROLINE D. CAMERON,
AND JOHN P. AND TEENA G. BROADAWAY, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2137-94. Filed November 29, 1995.
Ps were shareholders of X, which computed its
earnings and profits under the percentage of completion
method of accounting. X elected to be taxed as an S
corporation and, in a subsequent taxable year,
distributed a dividend to Ps.
Held, for purposes of measuring the amount of the
dividend, X's earnings and profits for its last taxable
year as a C corporation must be computed on the basis
of year-end estimates of the total costs of its long-
term contracts. The estimates may not be revised
retroactively to reflect actual costs, and earnings and
profits may not be adjusted for subsequent taxable
years to which the subchapter S election applied.
Edgar J. Tyler, for petitioners.
Michael F. O'Donnell, for respondent.
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