Garwood Irrigation Company - Page 1

                                   126 T.C. No. 12                                    

                               UNITED STATES TAX COURT                                

                      GARWOOD IRRIGATION COMPANY, Petitioner v.                       
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 1459-03.              Filed May 1, 2006.                    

                    P, an S corporation, is due an overpayment that                   
               exceeds $10,000.  R computes that overpayment using the                
               Federal short-term rate plus 0.5 percentage point                      
               according to R’s reading of sec. 6621(a)(1), I.R.C.  P                 
               maintains that it should not be treated as a                           
               corporation for purposes of determining the applicable                 
               rate because of its S corporation election.  P’s                       
               position is based upon sec. 6621(c)(3), I.R.C., which                  
               is cross-referenced in sec. 6621(a)(1), I.R.C.                         
                    Held:  The lower corporate rate set forth in the                  
               flush language of sec. 6621(a)(1), I.R.C., applies to C                
               corporations, and P is entitled to the higher rate of                  
               overpayment interest set forth in sec. 6621(a)(1)(B),                  
               I.R.C., for corporations (the Federal short-term rate,                 
               plus 2 percentage points).                                             

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