James L. and Leta A. Thurman - Page 16

                                       - 16 -                                         

          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                





Page:  Previous  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  Next

Last modified: May 25, 2011