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characterization of excluded COD income is more appropriately
determined at the S corporation level than at the shareholder
level and is, therefore, a subchapter S item subject to the
unified audit and litigation procedures. Sec. 6245; sec.
301.6245-1T(a)(1)(iv) and (b); see, e.g., Michaelis Nursery, Inc.
v. Commissioner, T.C. Memo. 1995-143 (indicating that the proper
characterization of payments as advance payments or refundable
deposits is a subchapter S item).
Finally, we do not find petitioner's alternative argument
convincing. See University Heights at Hamilton Corp. v.
Commissioner, 97 T.C. at 282. In University Heights, we held
that, once an S corporation has received a valid FSAA as required
by section 6223, and filed a timely petition as required by
section 6226 "the scope of our judicial review allows us to
determine all subchapter S items of the corporation * * * to
which the notice of FSAA relates". Id. (Emphasis added.) Based
on the above, we hold that we have jurisdiction in this
proceeding to review the correctness of respondent's
determination that Chesapeake's excluded COD income is not a
separately stated item of tax-exempt income for purposes of
section 1366(a)(1)(A). Secs. 6226(f), 6241, 6244.
Since the opening and reply briefs were filed in this case,
Nelson v. Commissioner, 110 T.C. 114 (1998) (Court-Reviewed), has
been released. (By Order, we requested the parties to file
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