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buy all the assets of S-1 and S-2 in exchange for stock in
A. S-1 and S-2 each deducted under sec. 174, I.R.C. 1954,
the amounts each assertedly paid to A to conduct the
research and development activities.
Held: Neither S-1 nor S-2 is entitled to a deduction
under sec. 174, I.R.C. 1954, because the amounts S-1 and S-2
allegedly paid to A were not paid in connection with S-1's
and S-2's respective trades or businesses.
Cheryl R. Frank and Gerald W. Kelly, Jr., for petitioners.
Lindsey D. Stellwagen, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
CHABOT, Judge: By separate notices of final S corporation
administrative adjustment (hereinafter sometimes referred to as
FSAA) respondent determined adjustments to the 1984 S corporation
income tax returns of Impact Research Corporation (hereinafter
sometimes referred to as IRC) and Research Impact Corporation
(hereinafter sometimes referred to as RIC).2 For IRC, respondent
2This method of resolving disputes regarding subchapter S
items was enacted by sec. 4 of the Subchapter S Revision Act of
1982, Pub. L. 97-354, 96 Stat. 1669, 1691, 1697, effective for
taxable years beginning after Dec. 31, 1982. It was repealed by
sec. 1307(c)(1) of the Small Business Job Protection Act of 1996,
Pub. L. 104-188, 110 Stat. 1755, 1781, 1787, effective for
taxable years beginning after Dec. 31, 1996. The year in issue
in the instant cases is 1984, a year to which this method
continues to apply. Thus, even though both of the FSAAs here
involved were issued after the 1996 repeal, we concur with the
parties’ position that this Court has jurisdiction to resolve the
parties’ disputes in the instant cases. See New York Football
Giants, Inc. v. Commissioner, 117 T.C. 152, 154 n.3 (2001).
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