John J. Petito - Page 6




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          failed to comply with the partnership audit and litigation procedures).     
               The unified S corporation audit and litigation procedures              
          are set forth in subchapter D of chapter 63 of subtitle F.2                 
          Section 6241 provides: “Except as otherwise provided in                     
          regulations prescribed by the Secretary, the tax treatment of any           
          subchapter S item shall be determined at the corporate level.”              
          Eastern States Cas. Agency, Inc. v. Commissioner, 96 T.C. 773,              
          775 (1991); Dial, USA, Inc. v. Commissioner, 95 T.C. 1, 1-2                 
          (1990).  The unified S corporation audit and litigation                     
          procedures were intended to promote the consistent treatment of S           
          items among S corporation shareholders.  See Allen Family Foods,            
          Inc. v. Commissioner, T.C. Memo. 2000-327; S. Rept. 97-640, at 25           
          (1982), 1982-2 C.B. 718, 729.                                               
               Pursuant to the authority granted under section 6241, the              
          Secretary promulgated regulations prescribing exceptions to the             
          unified S corporation audit and litigation procedures.  In                  
          particular, section 301.6241-1T(c)(2)(ii), Temporary Proced. &              
          Admin. Regs., supra, provides that the unified S corporation                


          2  Subchapter D of chapter 63 of subtitle F was codified                    
          pursuant to the Subchapter S Revision Act of 1982, Pub. L. 97-              
          354, sec. 4(a), 96 Stat. 1691-1692, effective with respect to tax           
          years beginning after Dec. 31, 1982.  Secs. 6241-6245 were                  
          repealed under the Small Business Job Protection Act of 1996,               
          Pub. L. 104-188, sec. 1307 (c)(1), 110 Stat. 1755, effective with           
          respect to tax years beginning after Dec. 31, 1996.                         








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