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of sections 541 through 547 are a part. Because subchapter S
of chapter 1 of the Internal Revenue Code does not specifically
provide that S corporations are subject to the personal holding
company provisions, an S corporation is not subject to the
personal holding company rules.
The Appeals Transmittal Memorandum and Supporting Statement
completed by Mr. Peter with respect to the Chans’ 1992 and 1993
tax years stated that “the examining agent determined that the
corporation was a personal holding company (“PHC”) subject to
the personal holding company tax and no longer eligible as a
subchapter S corporation.” (Emphasis added.) The Appeals
Transmittal Memorandum and Supporting Statement completed by
Mr. Peter with respect to KSCI’s case summarized Mr. Matos’s
classification of KSCI as a C corporation as follows:
Finally, the examining agent determined that the
taxpayer was a personal holding company (“PHC”) subject
to the PHC tax. As a result of his determining that
the taxpayer was a PHC, he denied the taxpayer its
subchapter S status and computed its tax liability
based upon the taxpayer being a regular Chapter C
corporation. [Emphasis added.]
The record as whole establishes that either Mr. Matos or
his supervisor determined that the personal holding company
provisions applied to KSCI regardless of its election to be
treated as an S corporation.4 Such a decision involves the
4 Although the provisions of sec. 1362(d)(3) do not apply
to the case at bar, they can cause certain S corporations with
(continued...)
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