Colorado Gas Compression, Inc. - Page 6




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          1374(d)(9), as amended, applicable if a qualified corporation               
          withdraws its S election.  Respondent concedes that petitioner              
          “made a valid election” to be an S corporation before 1989.                 
          Respondent, however, contends that, pursuant to section                     
          1374(d)(9), as amended, petitioner’s “most recent election”                 
          (i.e., 1994 S election) is the election to which section 1374, as           
          amended, refers.  Consequently, respondent contends that section            
          1374, as amended, “by its own literal terms”, is applicable to              
          petitioner’s 1994, 1995, and 1996 taxable years.  We agree.                 
               In 1989, when petitioner became a C corporation, the                   
          transition rule became inapplicable.  In 1994, petitioner made an           
          S election, and thus became subject to section 1374, as amended,            
          and in effect that year.  TRA section 633(d)(8) is applicable in            
          the case of an S election before January 1, 1989, while section             
          1374, as amended, is applicable to entities electing S                      
          corporation status after December 31, 1988.  In determining the             
          applicability of section 1374, as amended, section 1374(d)(9), as           
          amended, explicitly directs us to petitioner’s “most recent” S              
          corporation election (i.e., petitioner’s 1994 election).  Our               
          holding is a straightforward application of section 1374, as                
          amended, to petitioner’s 1994, 1995, and 1996 taxable years.  We            
          also note that our holding is consistent with the legislative               
          history accompanying TRA section 633.  See H. Conf. Rept. 99-841            
          (Vol. II), supra at II-198 to II-207, 1986-3 C.B. (Vol. 4) at               






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