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determining the existence of a PAL, section 469 treats each
activity separately.
Section 1371 was enacted in 1982 by section 2 of the
Subchapter S Revision Act of 1982, Pub. L. 97-354, 96 Stat. 1669,
as part of a continuing effort by the Congress to provide a
statutory framework whereby shareholders of closely held
corporations could obtain substantially the same tax treatment as
they would have received if they had conducted their activities
as a partnership without being required to accept the personal
liability attaching to a partner. Thus, subchapter S, of which
section 1371 was a part, dealt with the status of a taxpayer by
permitting a corporation to continue as the same corporate entity
but treating its income and deductions as those of its
shareholders and taxing them accordingly. As we observed in
Frederick v. Commissioner, 101 T.C. 35, 43 (1993):
conversion from a C corporation to an S corporation
does not create a new taxpayer or otherwise involve a
transfer of assets and liabilities from one entity to
another. Following its S corporation election, Quanta
is still the same taxpayer; Quanta merely has subjected
its income and expenses to a new taxing regime for
Federal income tax purposes. * * *
This structural difference, i.e., transactional versus
taxpayer status, is a significant element in synthesizing the
application of sections 469(b) and 1371(b)(1). It facilitates
our ability to take into account the objectives of Congress,
namely, (1) including section 469(b) to ease the restrictive
thrust of section 469 generally by limiting, but not necessarily
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