New York Football Giants, Inc. - Page 9

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          petitioner contends that section 301.6245-1T, Temporary Proced. &           
          Admin. Regs., supra, is invalid because it is illogical and                 
          inconsistent with the Internal Revenue Code.  Petitioner contends           
          that Congress extended the Tax Equity & Fiscal Responsibility               
          Act of 1982 (TEFRA), Pub. L. 97-248, 96 Stat. 324, rules only to            
          the shareholders of an S corporation and not to the S corporation           
          itself, and, thus, the regulation is contrary to the language of            
          the Code.  Petitioner’s claim misses the mark.                              
               The regulation is consistent with the statutory scheme for             
          unified audit and litigation procedures.  A subchapter S item is            
          any item of a subchapter S corporation to the extent that                   
          regulations provide that the item is more appropriately                     
          determined at the corporate level than at the shareholder level.            
          Sec. 6245.  The regulations provide that the taxes imposed at the           
          corporate level, namely, taxes imposed under sections 56, 1374,             
          and 1375, are subchapter S items because they are more                      
          appropriately determined at the corporate level.  The built-in              
          gains tax of section 1374 is more appropriately determined at the           
          corporate level because it relates to assets held by the                    
          corporation when it converted from a C to an S corporation.                 
               Section 301.6245-1T(a)(1)(i), Temporary Proced. & Admin.               
          Regs., 52 Fed. Reg. 3003 (Jan. 30, 1987), also includes in the              
          definition of subchapter S items the S corporation aggregate, and           
          each shareholder’s share of, items of loss of the corporation.              
          The section 1374 tax is treated as a loss sustained by the S                

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