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income for the year 2002, pursuant to the information return
filed by the corporation for that year.
Section 1362(a) allows a small business corporation to elect
to be governed by the provisions of subchapter S for its taxable
years. Such an election allows the income, expenses, and credits
of the corporation to flow through to the corporation’s
shareholders. Sec. 1366(a). As required by section 1362(a), the
election must be made by all shareholders, and the election is
effective and continues for all succeeding taxable years unless
terminated under section 1362(d). Such an election was made in
this case, and there was no termination of that election as to
the year at issue.
Petitioner did not include on his 2002 Federal income tax
return his distributive share of the taxable income reported by
the corporation as an S corporation for that year. Although it
is obvious to the Court that petitioner and his spouse had
serious differences between them, this Court is not the proper
forum for the resolution of these differences. All formalities
of the Internal Revenue Code were followed with respect to the S
corporation for the year 2002, and the distributive share of that
income to petitioner constitutes taxable income to him. The
Court, therefore, sustains respondent.
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Last modified: May 25, 2011