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OPINION
FOLEY, Judge: By notice dated July 28, 1998, respondent
determined deficiencies of $52,073, $709,939, and $161,037
relating to petitioner’s 1994, 1995, and 1996 Federal income
taxes, respectively. The parties submitted this case fully
stipulated pursuant to Rule 122. Unless otherwise indicated, all
section references are to the Internal Revenue Code for the years
in issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure. After concessions, the issue is whether
section 633(d) of the Tax Reform Act of 1986, Pub. L. 99-514, 100
Stat. 2278 (TRA), is applicable to the years in issue when
petitioner, in 1989, revoked, and, in 1994, regained, its S
corporation status.
Background
Petitioner, a corporation with one shareholder, was
incorporated in 1977 and, from that year through 1988, filed tax
returns as a C corporation. It had its principal place of
business in Longmont, Colorado, when the petition was filed. On
February 1, 1988, petitioner made a valid election to be an S
corporation, as defined by section 1361(a)(1). On that date,
petitioner had assets with unrealized gain, and earnings and
profits, accrued during the period when petitioner was a C
corporation. These assets included securities and interests in
real estate and oil and gas partnerships. Since February 1,
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