T.C. Memo. 2000-97
UNITED STATES TAX COURT
XAVIER J.R. AND SULOCHANA D. AVULA, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8084-98. Filed March 21, 2000.
Xavier J.R. Avula, pro se.
John E. Budde and John A. Freeman, for respondent.
MEMORANDUM OPINION
CHIECHI, Judge: Respondent determined the following defi-
ciencies in, additions to, and accuracy-related penalties on
petitioners’ Federal income tax (tax) for the years 1991 through
1995:
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Additions to Tax Accuracy-related Penalty
Year Deficiency Sec. 6651(a)(1)1 Sec. 6654(a) Sec. 6662
1991 $6,451 $573.22 $94.66 $1,269.20
1992 3,965 418.10 42.37 793.00
1993 5,693 744.22 87.69 1,105.60
1994 19,283 4,024.75 797.35 3,856.60
1995 3,760 -- -- 752.00
The only issue remaining for decision is whether petitioners
are entitled to deduct for 1993, 1994, and 1995 certain claimed S
corporation losses.2
Background
Some of the facts have been stipulated and are so found.
Petitioners resided in Rolla, Missouri, when they filed the
petition in this case.
During the years at issue, petitioner Xavier J.R. Avula (Mr.
Avula) was employed at the campus of the University of Missouri
located in Rolla, Missouri. During those years, petitioner
1
All section references are to the Internal Revenue Code in
effect for the years at issue. All Rules references are to the
Tax Court Rules of Practice and Procedure.
2
In the parties’ stipulation of facts and first supplemental
stipulation of facts, petitioners conceded certain determinations
in the notice of deficiency (notice). At the commencement of the
trial in this case, petitioner Xavier J.R. Avula informed the
Court that the only issue remaining for decision in this case
relates to the claimed S corporation losses. Petitioners pre-
sented no evidence and make no argument about, and do not other-
wise dispute, the remaining determinations in the notice that
have not been conceded by them in the parties’ stipulation of
facts and supplemental stipulation of facts. We conclude that,
except for the additions to tax determined under sec. 6654(a),
petitioners have abandoned contesting those other determinations.
See Rybak v. Commissioner, 91 T.C. 524, 566 n.19 (1988). As to
the additions to tax determined under sec. 6654(a), this Court
has no jurisdiction over such determinations. See sec.
6665(b)(2).
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Sulochana D. Avula (Ms. Avula) was employed as a technician at a
pharmacy.
In October 1989, the State of Missouri authorized Interna-
tional Academy of Mathematical and Computer Modelling, Inc., to
conduct business as a not-for-profit corporation. Petitioners own
100 percent of the stock of that corporation. Effective January
1, 1991, the State of Missouri canceled the corporate license of
the International Academy of Mathematical and Computer Modelling,
Inc., because the corporation failed to file a correct annual
report with the secretary of state of Missouri. In May 1999,
petitioners contacted the State of Missouri about the Interna-
tional Academy of Mathematical and Computer Modelling, Inc. On
July 15, 1999, the International Academy of Mathematical and
Computer Modelling, Inc., became an active not-for-profit corpora-
tion.
Petitioners filed a joint Federal tax return (return), Form
1040, for each of the years at issue on the date indicated:
Form 1040 Filing Date
1991 April 14, 1995
1992 April 17, 1996
1993 November 4, 1996
1994 November 22, 1996
1995 December 3, 1996
Petitioners included a Schedule C, Profit or Loss From
Business (Schedule C), with each of their 1991 and 1992 returns.
Petitioners did not include a Schedule C with any of their returns
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for 1993, 1994, and 1995. In Schedule C of their return for each
of the years 1991 and 1992, petitioners indicated that their
principal business or profession was consulting service, continu-
ing education, and publishing. They further indicated in each
such Schedule that the name of their business was IAMCM and that
the employer identification number (EIN) for that business was 43-
1577193.
Petitioners included a Schedule E, Supplemental Income and
Loss (Schedule E), with each of their 1993, 1994, and 1995 re-
turns. In part II, Income or Loss From Partnerships and S Corpo-
rations, of each of those Schedules, petitioners claimed, inter
alia, that they had a loss from an S corporation. They identified
that corporation as IAMCM in part II of Schedules E of their 1993
and 1994 returns and as IAMCM/PRINCIPIA in part II of Schedule E
of their 1995 return. Petitioners further indicated in those
Schedules E that the EIN of that claimed S corporation was 43-
1577193, the same EIN of the business called IAMCM that they
identified in Schedules C of their 1991 and 1992 returns.
During the examination in late 1996 by the Internal Revenue
Service (Service) of petitioners’ years at issue, the Service’s
examining agent (agent) requested copies of Forms 1120S for IAMCM.
The agent renewed his request in January 1997.
In February and March 1997, petitioners prepared and mailed
to the agent a Form 1120S, U.S. Income Tax Return for an S Corpo-
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ration (Form 1120S), for IAMCM/PRINCIPIA for 1991 and Forms 1120S
for IAMCM for 1993 and 1994. The EIN shown in each of those Forms
1120S was XX-XXXXXXX. Petitioners did not prepare or file Forms
1120S for IAMCM/PRINCIPIA or IAMCM for 1992 or 1995.
In April 1997, the agent advised petitioners about the rules
that require the filing of an election on Form 2553, Election by a
Small Business Corporation (Form 2553), in order for a small
business corporation to be treated as an S corporation. No Form
2553 has been filed with respondent on behalf of IAMCM, IAMCM/
PRINCIPIA, or International Academy of Mathematical and Computer
Modelling, Inc.
In the notice, respondent determined, inter alia, to disallow
the S corporation losses claimed in Schedules E of petitioners’
1993, 1994, and 1995 returns because “The election to be treated
as an S corporation (small business corporation) was determined to
be invalid.”
Discussion
Petitioners used the same EIN for International Academy of
Mathematical and Computer Modelling, Inc., IAMCM, and IAMCM/
PRINCIPIA. Thus, we conclude that those different names refer to
the same corporation. For convenience, we shall hereinafter refer
to that corporation as IAMCM.
Petitioners concede that IAMCM never filed Form 2553 with
respondent. The record does not disclose that IAMCM otherwise
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attempted to make an election to be treated as an S corporation.
Nonetheless, petitioners argue that IAMCM should now be permitted
to make an S corporation election and that that election should be
retroactive to 1993, 1994, and 1995. Respondent disagrees.
A small business corporation generally may elect to be an S
corporation. See sec. 1362(a). Assuming arguendo, without
deciding, that IAMCM qualifies as a small business corporation as
defined in section 1361(b), it generally may make an election
under section 1362(a) to be an S corporation for any taxable year
at any time during the preceding taxable year or at any time
during the taxable year and on or before the 15th day of the third
month of the taxable year.3 See sec. 1362(b)(1).
On the record before us, we find that IAMCM did not make a
timely and valid election to be treated as an S corporation for
any of the years 1993, 1994, and 1995 (or for either of the
remaining years at issue, 1991 and 1992).4 On that record, we
3
If a small business corporation makes an election under
sec. 1362(a) for any taxable year and that election is made after
the 15th day of the third month of the taxable year and on or
before the 15th day of the third month of the following taxable
year, such an election shall be treated as made for the following
taxable year. See sec. 1362(b)(3).
4
The record is devoid of evidence explaining why IAMCM did
not file Form 2553 with respondent within the time prescribed by
sec. 1362(b). At trial, Mr. Avula testified that, when the agent
informed him in April 1997 about the rules requiring a small
business corporation to file Form 2553 in order for it to be
treated as an S corporation, no such form was filed “for ethical
reasons”.
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sustain respondent’s determinations to disallow the S corporation
losses claimed by petitioners for 1993, 1994, and 1995.5
To reflect the foregoing and the concessions of petitioners,
An appropriate order dismissing
this case for lack of jurisdiction
as to the additions to tax
determined under section 6654(a) and
decision for respondent will be
entered.
5
We have considered all of the contentions and arguments of
petitioners that are not discussed herein, and we find them to be
without merit and/or irrelevant.