Rainbow Tax Service, Inc. - Page 1

                                   128 T.C. No. 5                                     

                               UNITED STATES TAX COURT                                

                      RAINBOW TAX SERVICE, INC., Petitioner v.                        
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 7738-05.              Filed March 8, 2007.                  

                    Petitioner employed individuals to provide tax                    
               return preparation and bookkeeping services.                           
               Petitioner calculated its tax liability for                            
               petitioner’s tax years ending June 30, 2002 and 2003,                  
               using the graduated corporate income tax rates set                     
               forth in sec. 11(b)(1), I.R.C.                                         
                    Held:  Petitioner’s tax return preparation and                    
               bookkeeping services constitute accounting services for                
               purposes of sec. 448(d)(2), I.R.C., and petitioner is                  
               therefore subject to the sec. 11(b)(2), I.R.C., flat                   
               35-percent tax rate applicable to qualified personal                   
               service corporations.                                                  

               Donna Joyner-Rodgers (an officer), for petitioner.                     
               Derek W. Kaczmarek, for respondent.                                    

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