Med James, Inc. - Page 14

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               A threshold underpayment of tax is defined for this purpose            
          as the excess of a tax imposed by the Internal Revenue Code (the            
          Code) (exclusive of interest, penalties, additional amounts, and            
          additions to tax) for the taxable period over the amount of tax             
          paid on or before the last date prescribed for payment.  Sec.               
          301.6621-3(b)(2)(ii), Proced. & Admin. Regs.  This case turns on            
          when the tax imposed by the Internal Revenue Code for purposes of           
          determining the amount of a threshold underpayment is determined.           
          If determined at the time hot interest starts to accrue, when the           
          tax was assessed, or after this Court’s decision, petitioner                
          prevails.  If determined at the time petitioner’s return was                
          filed, respondent prevails.  On the basis of the Code and the               
          regulations, we hold that the determination in this case is made            
          no sooner than the time of entry of our decision that there was a           
          deficiency of $63,573.                                                      
               The first step is to determine the amount of tax imposed by            
          the Code on petitioner for the tax year ended January 31, 1994.13           
          Section 11(a) imposes a tax for each tax year on the taxable                
          income of a corporation.  Taxable income is the corporation’s               
          gross income minus the deductions allowed by chapter 1 of the               
          Code.  Lastarmco, Inc. v. Commissioner, 79 T.C. 810, 812 (1982),            


               13The taxable period in this case is the taxable year                  
          because the taxes at issue are income taxes imposed by subtitle A           
          of the Code.  Sec. 6621(c)(3)(B); sec. 301.6621-3(b)(4), Proced.            
          & Admin. Regs.                                                              




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