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does not comply with the intent of the statute or the regulations
proposed by respondent.
Applying existing law, substantial compliance with election
requirements normally entails, at a minimum, a clear expression
of the electing party's intention to elect appearing on either
its original return or, if the circumstances necessitating an
election arise after the filing of an original return, as soon as
practicable on an amended return. Fisher Indus., Inc. v.
Commissioner, 87 T.C. 116, 122 (1986), affd. 843 F.2d 224 (6th
Cir. 1988); see also Young v. Commissioner, supra at 839
(electing party must exhibit in some manner his unequivocal
agreement to accept both the benefits and the burdens of the
election).
Respondent argues that petitioners' signed statements of
election and consent provide clear and unequivocal evidence of
consent. Respondent further argues that once EMFI made the
alleged elections, all its actions and those of petitioners are
consistent with having made the election. Respondent contends
that EMFI's Forms 1120S showed reductions of C corporation
"earnings and profits" in 1988 and 1992. Respondent asserts that
this is evidenced by EMFI's Forms 1120S, which showed a $3
million reduction on line 26 (Other retained earnings) of
Schedule L in December 1988, and elimination of the remaining
retained earnings in the same manner on EMFI's Schedule L in
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