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during the years in issue were two grantor trusts. Petitioner
reasons that, by virtue of the general attributes of a grantor
trust, as well as the particular treatment afforded a grantor
trust as a permitted shareholder of an S corporation, the deemed
owners of the trusts should be considered Primco's shareholders
for purposes of applying section 301.6241-1T(c)(2), Temporary
Proced. & Admin. Regs. In this regard, petitioner relies
primarily upon section 1361(c)(2), which provides that a grantor
trust may be a shareholder of an S corporation and that the
deemed owner of the trust will be treated as the shareholder.6
6 Sec. 1361(c)(2)(B)(i) provides in pertinent part:
(c) Special Rules for Applying Subsection (b).--
* * * * * * *
(2) Certain trusts permitted as shareholders.--
(A) In general.--For purposes of subsection
(b)(1)(B), the following trusts may be
shareholders:
(i) A trust all of which is treated
(under subpart E of part I of subchapter J of
this chapter) as owned by an individual who
is a citizen or resident of the United
States.
* * * * * * *
(B) Treatment as shareholders.--For purposes
of subsection (b)(1)--
(i) In the case of a trust described in
clause (i) of subparagraph (A), the deemed
owner shall be treated as the shareholder.
(continued...)
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