- 8 - eliminating, use of PAL's, and (2) including section 1371(b)(1) to narrow the liberalizing thrust of subchapter S generally, and to prevent abuse by limiting, but not necessarily eliminating, the ability of a corporation to utilize subchapter S status to pass on its C status losses to its shareholders, see Rosenberg v. Commissioner, 96 T.C. 451, 455 (1991). Respondent's position is straightforward. Respondent maintains that section 1371(b)(1) is clear on its face and that the word "carryforward" in that section is not limited and encompasses PAL's. Respondent argues that nothing in the legislative history of either section 1371(b)(1) or 469 casts doubt on respondent's position and that petitioner's attempts to accord a narrow interpretation to the word "carryforward", both directly and by interpolating section 469, are unavailing. Petitioner's arguments fall into two categories: (1) Suspended PAL's are not "carryforwards" within the meaning of section 1371(b)(1), because the PAL rules, set forth in section 469, constitute an accounting method which St. Charles should continue to use after its conversion to an S corporation; and (2) pursuant to principles of statutory construction, the specific language of section 469, particularly subsections (f)(2) and (g)(1)(A), precludes the application of section 1371(b)(1). Petitioner asserts that, unless it is permitted to utilize the suspended PAL's in the year of disposition of the activitiesPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011