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subchapter S item. See supra pp. 6-8. Thus, an S corporation’s
income tax liability under subtitle A is determined by taking
into account the built-in gains tax of that corporation.
Therefore, the S corporation is treated as a party to the
proceeding.9 Secs. 6226(a), 6244. We conclude that KRP is a
party to this proceeding and that we have jurisdiction to enter a
decision against KRP regarding the built-in gains tax.
To reflect the foregoing,
An appropriate order will be
issued denying petitioner’s motion
for partial summary judgment.
9 If S corporations could not be parties to the corporate
level proceedings, then S corporations would be prevented from
contesting built-in gains tax adjustments contained in FSAAs.
See supra pp. 6-8 (holding that the built-in gains tax is a
subch. S item and that the appropriate way for the Commissioner
to determine a built-in gains tax adjustment is via an FSAA).
This would not make sense as the Court has jurisdiction to
determine all subch. S items of the corporation for the taxable
year to which the FSAA relates. Secs. 6226(f), 6244.
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Last modified: May 25, 2011