1989 U.S. Tax Ct. LEXIS 149">*149 A petition for redetermination of a Notice of Final S Corporation Adjustments was filed by the president of the S corporation as the tax matters person. Respondent moved to dismiss for lack of jurisdiction on the ground that the president was not a shareholder in the S corporation and accordingly could not be a tax matters person.
93 T.C. 618">*619 OPINION
This case was heard by Special Trial Judge Helen A. Buckley pursuant to the provisions of section 7443A(b) of the Code and Rule 180. 1 The Court1989 U.S. Tax Ct. LEXIS 149">*150 agrees with and adopts the Special Trial Judge's opinion which is set forth below.
OPINION OF THE SPECIAL TRIAL JUDGE
Buckley,
Respondent determined that there were adjustments to the return filed by Gold-N-Travel, Inc., an S corporation, for the year ended December 31, 1983. By letter dated February 20, 1987, respondent sent a Notice of Final S Corporation Administrative Adjustment (FSAA) addressed to "Tax Matters Person," Gold-N-Travel, Inc.
On May 21, 1987, a petition was filed by Gold-N-Travel, Inc., through Wayne M. Haskins. Mr. Haskins was identified within the petition as the corporate tax matters partner [sic].
Respondent moves to dismiss on the ground that Wayne M. Haskins was not a shareholder1989 U.S. Tax Ct. LEXIS 149">*151 of and had no profits interest in the corporation at the close of the taxable year 1983. Respondent's position is that only a shareholder can constitute a tax matters person (hereafter TMP), and that an officer nonshareholder cannot be so designated. Respondent goes on to contend that Bruce E. Baird is the proper TMP, as he is one of four shareholders having an equally large profits interest in the corporation and his name would appear first in an alphabetical listing of said shareholders. The Form 1120S, the subchapter S income tax return form, filed by the corporation for 1983 was executed by Wayne M. Haskins, as "President."
93 T.C. 618">*620 The Subchapter S Revision Act of 1982, Pub. L. 97-354, 96 Stat. 1669, provides, inter alia, for a consideration of the tax treatment of items of subchapter S income deductions and credits in a unified proceeding rather than in separate proceedings with shareholders. Thus,
The provisions of -- (1) subchapter C which relate to -- (A) assessing deficiencies, and filing claims for credit or refund, with respect to partnership items, and (B) judicial determination of partnership items, and (2) so much of the other provisions of this subtitle as relate to partnership items,
These provisions are applicable to tax years beginning after December 31, 1982. The Secretary has not yet issued regulations under
93 T.C. 618">*621 Designation of Tax Matters Person (TMP)
An S corporation may designate an individual shareholder as the TMP for a specific1989 U.S. Tax Ct. LEXIS 149">*153 corporate tax year by attaching a statement to the return that:
1. Identifies by name, address, and taxpayer identification number the corporation and the individual shareholder designated as the TMP, and
2. Declares that the attached statement is a designation of a TMP for the tax year to which the return relates (an S corporation may not designate a TMP for any tax year other than the year for which the return is being filed), and
3. Is signed by a corporate officer authorized to sign the corporation's return.
No such designation was made here.
1989 U.S. Tax Ct. LEXIS 149">*154 Respondent contends that the provisions of
Our concern must be to apply these partnership provisions to the determination of a TMP in a subchapter S context. This is a matter of first impression.
We turn to the provisions regarding designation of a TMP. In grafting the partnership provisions onto S corporation 93 T.C. 618">*622 audits, Congress planned that the partnership rules be modified by Treasury regulations to take account of the differences between a corporation and a partnership. The Senate Finance Committee report noted:
For example, the selection of a person to act on behalf of the corporation in the way the tax matters partner acts on behalf of a partnership must take into account that a corporation has no person to correspond to a general partner, as such (since the corporate shareholders are not liable for the corporation's debts, as is a general partner). * * * [S. Rept. 97-640 (1982),
In the absence of regulations, however, we can do no more than attempt to apply the partnership rules regarding designation of a TMP 1989 U.S. Tax Ct. LEXIS 149">*156 to the S corporation situation. Accordingly, we hold that the TMP of a subchapter S corporation must be a shareholder of that corporation. Petitioner, Wayne M. Haskins, while corporate president, does not have such a shareholder interest. In the absence of a designation of TMP, we hold that the shareholder 3 with the largest profit interest in the year involved is the TMP. If more than one shareholder falls into this category, the person whose name would appear first in an alphabetical listing is the TMP. If that person refuses to act, the Secretary may designate another shareholder as TMP or any other shareholder may so act.
1989 U.S. Tax Ct. LEXIS 149">*157 Respondent has moved to dismiss this petition which was filed on May 21, 1987, for lack of jurisdiction. We note that respondent, by answer filed July 20, 1987, admitted that Wayne M. Haskins was "tax matters partner" [sic]; that respondent attended a pretrial conference on October 4, 1988, in Houston, and did not raise this question until July 24, 1989, shortly after this matter was set for trial. Under these circumstances, we do not agree that this petition
In our discretion, we view the petition as an imperfect petition, the defects of which may be cured by the filing of 93 T.C. 618">*623 an amended petition by any appropriate shareholder if there is evidence that Mr. Haskins, the president of the corporation, was duly authorized to file the original on behalf of the nonsigning TMP shareholder. As we stated in
The law is clear that when an individual or entity that is not a tax matters partner files a petition on behalf of a partnership within the 90-day period provided under
Accordingly, we will withhold our action on respondent's motion for 60 days from the date of filing of this opinion.
1. Section references are to the Internal Revenue Code of 1954 as amended and in effect for the tax year at issue unless otherwise indicated. Rule references are to the Tax Court Rules of Practice and Procedure.↩
2. We have previously considered cases which have arisen as a result of the failure of the Internal Revenue Service to promulgate regulations in regard to the subch. S audit provisions enacted in 1982. Thus, in
3. Respondent contends that there are only four shareholders. We note that sec. 301.6241-1T(c)(2)(ii),
