Lucian T. Baldwin, III - Page 41

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               In an amendment to petition filed pursuant to a motion for             
          leave to amend petition that we granted, petitioner alleged that            
          he was not entitled to BAC’s passthrough losses, reasoning that             
          BAC did not have a valid S corporation election on file at any              
          time during the relevant taxable years, and asserted that we                
          lacked jurisdiction over respondent’s BAC adjustments because               
          respondent never issued a notice of deficiency to BAC as a C                
          corporation.  Respondent filed a notice of objection raising the            
          affirmative defenses of equitable estoppel and the duty of                  
          consistency and an amendment to answer that clarified that he had           
          not placed the status of BAC as an electing corporation under               
          subchapter S at issue in the consolidated cases.                            
               Section 1362(a) provides that small business corporations              
          may elect to be governed by the provisions of subchapter S and to           
          be taxed thereunder as passthrough entities.  For such an                   
          election to be valid, all shareholders of the corporation, as of            
          the date the election is made, are required to consent to the               
          election.  Sec. 1362(a)(2); Wilson v. Commissioner, 560 F.2d 687,           
          689 (5th Cir. 1977), affg. T.C. Memo. 1975-92.  The parties agree           
          that Mrs. Baldwin did not sign the Form 2553.  The parties do not           
          agree, however, as to whether respondent may continue to treat              
          BAC as an S corporation for the years at issue.  We examine the             
          duty of consistency to resolve the dispute.                                 

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