Lucian T. Baldwin, III - Page 18

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               BAC’s S Election                                                       
               Mr. Portman recommended that BAC be owned by Mrs. Baldwin in           
          order to protect petitioner’s trading business from liability in            
          the event of an accident and informed petitioner’s accountant               
          that Mrs. Baldwin would own BAC.  Mr. Portman prepared BAC’s Form           
          2553, Election by a Small Business Corporation (Under section               
          1362 of the Internal Revenue Code), and sent the Form 2553 to               
          petitioner with instructions for Mrs. Baldwin to sign as sole               
          shareholder.  However, Mrs. Baldwin did not sign the form and did           
          not consent to BAC’s election to be treated as an S corporation.            
          Instead, Liz Matre signed Mrs. Baldwin’s name (as consenting                
          shareholder and as president of BAC) on the form.  Respondent               
          accepted the facially complete Form 2553 on May 31, 1988.                   
               BAC’s 1988 and 1989 Forms 1120S, U.S. Income Tax Return for            
          an S Corporation, list Mrs. Baldwin as BAC’s sole shareholder.              
          BAC’s 1990, 1991, and 1992 Forms 1120S, which were filed after              
          petitioners’ divorce proceeding had commenced, list petitioner as           
          BAC’s sole shareholder.                                                     
               BAC’s Transportation Activity                                          
               During the years at issue, petitioner regularly used the               
          Sabre to transport himself and his family, friends, and other               
          invited guests to Granot Loma.  In an effort to structure the               
          operation of BAC as a business, petitioner, beginning in                    
          approximately May 1989, arranged for BAC to invoice one of his              

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