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aircraft parts. Petitioner and Mr. Turner each made initial
capital contributions to Union Machine. Petitioner contributed
$12,000 of inspection equipment and granite,3 and Mr. Turner
transferred his personally owned equipment. Mr. Turner became
president of Union Machine, and petitioner became vice
president.4
On January 10, 1996, Union Machine filed with the Internal
Revenue Service (IRS) a Form 2553, Election by a Small Business
Corporation, to be treated as an S corporation, which the IRS
accepted effective January 2, 1996.5 Since then, Union Machine
has operated as an S corporation on a calendar year basis. The
Form 2553 listed the shareholders as follows:
Date of
Name Shareholder Consent No. shares1 Date
Acquired
Philip L. Turner6/28/95 51 1/2/96
Ronald L. DeVault 6/28/95 49 1/2/96
Gigi DeVault2 9/29/95 -- 1/2/96
1At all relevant times, the number of shares owned by each
shareholder has remained the same.
2 At the time of the S corporation election, Gigi DeVault (Mrs.
DeVault) was petitioner’s spouse.
After the formation of Union Machine, Mr. Turner resigned
from Modern to manage Union Machine’s day-to-day operations.
Petitioner, on the other hand, continued to work full time at
3 Petitioner obtained a personal loan from Household
Finance to purchase these items.
4 At all relevant times, Mr. Turner has remained president
of Union Machine.
5 We note that Form 2553, Election by a Small Business
Corporation, incorrectly listed Union Machine’s date of
incorporation as Jan. 2, 1996.
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