-52-
income, consisting of $374,000 from Chartered Representative
fees, $8,900 from setup fees, and $53,500 from options. SSI's
own fiscal 1981 subchapter S corporation tax return reported only
$8,347 in gross income. We have found that SSI's undistributed
taxable income for its fiscal 1981 was $108,238.39, and
petitioners' 76-percent share of this is $82,261.18, which is
taxable to petitioners for 1981. Supra C. SSI and Its Chartered
Representatives.
Under the law then in effect, the undistributed taxable
income of a subchapter S corporation for a taxable year was
required to be included in the gross incomes of those persons who
were shareholders of the corporation on the last day of that
taxable year of the corporation, in proportion to those
shareholdings. Sec. 1373(b). In general, undistributed taxable
income was taxable income minus dividends distributed. See
1373(c).27
Our findings take into account the distributions that SSI
made to its shareholders in SSI's fiscal year ended July 31,
1981. These distributions reduce the amount of SSI's fiscal 1981
undistributed taxable income. The distributions made later in
27 These rules were substantially revised effective for
taxable years beginning after Dec. 31, 1982. Secs. 2 and 6(a) of
the Subchapter S Revision Act of 1982, Pub. L. 97-354, 96 Stat.
1669, 1697. The revisions (see especially secs. 1366-1368) do
not apply to SSI's taxable years ending July 31, 1981, and 1982,
and so do not affect the instant case.
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