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They also received loan repayments from PMSI of $240,590 in 1995
and $60,815 in 1996.
Petitioners’ individual income tax return for 1997 was due
on October 15, 1998. The return was prepared in March 1999 and
filed on May 13, 1999.
OPINION
A shareholder in an S corporation must take into account his
or her pro rata share of the corporation’s income or loss. Sec.
1366(a). PMSI is a subchapter S corporation, and Ms. Peacock is
its only shareholder. We must determine the extent of PMSI’s
deductions for its fishing activity that enter into the
computation of its income or loss. Respondent denied some of
those deductions, determining that the fishing activity was not
engaged in for profit. Respondent also determined that
petitioners could not deduct the claimed bad debt and that they
were liable for the addition to tax and the accuracy-related
penalties mentioned above.
Petitioners have not argued that either section 7491(a) or
(c) applies to this case. Moreover, the record does not indicate
that respondent’s examination of the subject years commenced
after July 22, 1998. Seeing that section 7491 applies only to
court proceedings arising from examinations commencing after
July 22, 1998, Internal Revenue Service Restructuring and Reform
Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727, we
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