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payment of $1.2 million in the year in issue. Of that amount,
$929,915 was taxable.
E. Petitioner's S Corporation Election and Income Tax Returns
Petitioner was a subchapter C corporation from August 30,
1960, to June 30, 1985. On July 1, 1985, petitioner elected to
be taxed under subchapter S.
Petitioner deducted $247,000 for bonuses it paid to its
officers as part of the compensation of $618,295 it paid to the
officers (not counting fringe benefits) for the year in issue.
Petitioner reported the following on a Schedule K attached
to its S corporation return for the year in issue:
Ordinary income $893,236
Income from rental real
estate activity 38,033
Long term capital gain 929,915
Charitable contributions (2,845)
Total $1,858,339
Petitioner did not include the $929,915 gain on its tax
return for 1987. However, petitioner reported each officer's
share on his respective Schedule K-1. Petitioner allocated the
gain to Chasin, Hanson, and Searing, each of whom reported one-
third of the gain on his individual income tax return for 1987.
Petitioner seeks to delay the year of its deduction of
bonuses for its officers from the year in issue to the following
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