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The issues raised in the motion concern KRP, Inc.’s (KRP)
liability for the built-in gains tax imposed pursuant to section
1374 for 1995.2
Background
KRP is a corporation organized and existing under the laws
of the State of Alaska. KRP is a calendar year taxpayer. On
July 1, 1985, KRP was incorporated. On July 1, 1992, KRP elected
to be treated as an S corporation. During 1994 and 1995, this
election remained in effect. At the time KRP made the S
corporation election, it owned, among other things, two gas
stations.
KRP mailed its 1994 and 1995 Federal income tax returns to
the Internal Revenue Service (IRS) on September 15, 1995, and
August 16, 1996, respectively. On its 1995 return, KRP reported
a $494,576 gain on the sale of the gas stations, which it divided
between ordinary gain ($212,903) and section 1231 gain
($281,673).
The IRS audited KRP’s 1994 and 1995 returns. In connection
with this audit, the IRS and KRP, via the tax matters person,
entered into three consents on Forms 872-S, Consent to Extend the
Time to Assess Tax Attributable to Items of an S Corporation, to
extend the time to assess any Federal income tax attributable to
2 The motion for partial summary judgment addresses only
one of several issues petitioner raised in the petition.
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