- 9 - A. Discharge of Indebtedness Income Stipulated evidence--specifically, Bonnevista’s 1991 Federal income tax return and Castle Tower’s 1990 Federal income tax return--shows that as of December 31, 1991, petitioner owed Bonnevista $2,244,164, and that as of December 31, 1990, he owed Castle Towers $633,329. Petitioners have stipulated that Bonnevista and Castle Towers filed no subsequent Federal income tax returns. These corporations failed, however, to provide respondent the notification that would have been required if they had ceased to exist.10 The stipulated evidence shows that in March 1993 when he submitted his financial statement to the IRS, petitioner represented under penalties of perjury–-and does not now dispute--that he no longer owed these liabilities. Petitioner does not argue, and has adduced no evidence to show, that he directly repaid these loans. 10 If an S corporation ceases to exist, it thereby terminates its election under sec. 1362(a) to be taxed as an S corporation and is required to attach to its return for the taxable year in which the termination occurs a notification that a termination has occurred and the date of termination. See sec. 1.1362-2(b)(1), Income Tax Regs. In addition, if the corporation has ceased to exist, box F(2) of Form 1120S, indicating a final return, must be checked. See Instructions for Form 1120S; see also sec. 1.6037-1(a)(5), Income Tax Regs. (the return of an S corporation shall include, inter alia, information as is required by the instructions issued with respect to the form). The last returns presented by Bonnevista and Castle Towers, as stipulated into evidence, include no attachments notifying the Commissioner that a termination has occurred, nor is box F(2), indicating a final return, checked on either return.Page: 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