James L. and Leta A. Thurman - Page 18

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          to Mr. and Mrs. Thurman in the respective amounts of $758,745 and           
          $1,228,320.                                                                 
               Moreover, EMFI actually made two separate distributions that           
          petitioners initially did not report as taxable income for 1992.            
          Petitioners amended their 1992 Form 1040, the year in which the             
          distributions were made and included the distributions in taxable           
          income and paid the related tax.  Ultimately, petitioners filed             
          another amended return in which they removed the distributions              
          from taxable income, made a claim for refund, and now assert that           
          EMFI did not make an election to first distribute earnings and              
          profits.                                                                    
               With respect to petitioners' individual filings, evidence              
          that EMFI intended to file an election is further diminished by             
          the fact that petitioners filed their first amended return, which           
          represented the distributions as dividends, on June 18, 1993,               
          whereas EMFI was not required to file Form 1120S for the fiscal             
          year ended October 31, 1993, until long after petitioners filed             
          their amended return.  It is certainly conceivable that EMFI,               
          through its officers, made a decision as to whether or not to               
          file an election between the time that petitioners filed their              
          amended return in June 1993 and the time that EMFI filed its                
          corporate return.                                                           
               Although there appears to be some confusion in petitioners'            
          individual filings, it is clear that no election was filed by               





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