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$14,396 for labor. Petitioners subtracted $28,067 from $17,995
of income and reported a loss of $10,072 for that activity.
OPINION
A. Whether Petitioners May Deduct Losses From Western in 1999,
2000, and 2001
1. Petitioners’ Contentions and Background
Petitioners contend that (1) they properly elected S
corporation status for Western, (2) Western was an S corporation,
(3) they substantiated the losses they deducted, (4) respondent
erroneously determined before 1999 that Western’s S corporation
election was invalid, and (5) they may deduct Western’s losses
for 1999, 2000, and 2001.4 We disagree.
An election of a corporation to be an S corporation under
sections 1361(a) and 1362(a)(1) must be complete, properly filed,
and made in accordance with regulations prescribed by the
Secretary. Sec. 1377(c); Pestcoe v. Commissioner, 40 T.C. 195,
197 (1963). A corporation electing S corporation status must
file a properly completed Form 2553 containing the information
required by that form. Sec. 1.1362-6, Income Tax Regs.
4 Respondent’s determination is presumed to be correct and
petitioners bear the burden of proof on all issues in this case.
See Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Petitioners do not contend that respondent bears the burden of
proof under sec. 7491(a). However, respondent bears the burden
of production under sec. 7491(c) as to the accuracy-related
penalty under sec. 6662(a).
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