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ESTATE IS TO BE TREATED AS ADJUSTED INCOME FROM
RENTS, AS PER CODE SEC. 543(A)(2) AND (B)(3).
"""SEE ATTACHED"""
CHAR-LIL CORPORATION'S ADJUSTED INCOME FROM
RENTS, AS DEFINED MEETS THE 50% TEST AND THE 10%
TEST TO BE EXCLUDABLE FROM PERSONAL HOLDING
COMPANY INCOME, AS PER CODE SECS. 541-547.
IT IS OUR CONCLUSION THAT CHAR-LIL CORPORATION
IS NOT SUBJECT TO PERSONAL HOLDING COMPANY TAX
BECAUSE IT DOES NOT MEET THE 60% TEST ON PERSONAL
HOLDING COMPANY INCOME!
"""SEE ATTACHED"""
In the case of petitioner's returns for 1989 through
1993, petitioner argues that there was adequate disclosure
because the personal holding company tax issue is apparent
from the face of each return. In support of that argument,
petitioner points to the testimony of respondent's revenue
agent, who stated that he identified the issue based upon a
review of petitioner's 1993 return. The agent's testimony
on cross-examination on this point is as follows:
Q Mr. Neubauer, you testified that, at the
time you began the audit, you identified the
personal holding company issue as a subject of
your audit. Is that correct?
A Potentially, the personal holding company
tax could apply.
Q What--on what basis did you make that
identification of that audit issue?
A Just the--just with the comparison of the
interest income versus the rents.
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