Phillip and Gladies Aaron - Page 3

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          of the shares of BP Concessions.  On or about October 1, 1988, BP           
          Concessions elected to become an S corporation pursuant to                  
          section 1362(a).                                                            
               In December 1996, petitioner and Mr. Foster agreed in a                
          board meeting to terminate BP Concessions’ S corporation status             
          by revoking the S corporation election.  They decided to revoke             
          the S corporation election on account of an anticipated and                 
          substantial distributive share of income based on “a lowering of            
          the cost of goods which was going to result in an increase from             
          prior years” to the shareholders.                                           
               Petitioner was responsible for revoking the election.  For             
          the revocation to be effective for 1997, petitioner had to revoke           
          the S corporation election by March 17, 1997.  Petitioner failed            
          to revoke the S corporation election by March 17, 1997, because             
          he was ill with cancer.  Indeed, the parties stipulated that BP             
          Concessions was an S corporation during the years 1997 and 1998.            
          As of March 13, 2003, the date of the trial in this case,                   
          petitioner had not properly revoked the S corporation election              
          for BP Concessions.                                                         
               Keith Meyers, the accountant who prepared BP Concessions’              
          tax return for 1997, was unaware of the shareholders’ desire to             
          terminate the S corporation election.  On October 20, 1998,                 
          petitioner signed the Form 1120S, U.S. Income Tax Return for an S           
          Corporation, for 1997.  The Schedule K-1, Shareholder’s Share of            






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