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Federal Income Taxation

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Title: Federal Income Taxation
Author: Phelan, Marilyn E.
Abstract: The Fifth Circuit issued thirty-two decisions involving federal taxation issues during the current survey period. The court ruled that a shareholder's guaranty of a third party loan to a Subchapter S corporation will not result in an increase in a shareholder's basis so as to permit the shareholder to deduct additional losses incurred by an S corporation. The Fifth Circuit also ruled that the procedural provisions relating to the audit of partnerships apply to S corporations; thus, if an S corporation has ten or fewer shareholders, it is exempt from unitary audit proceedings. The court criticized the Internal Revenue Service (IRS) for continually litigating the issue of whether life insurance proceeds are in a decedent's estate when the decedent had paid the premiums on the policy. The Fifth Circuit further expressed disapproval of the reoccurring IRS decisions to litigate a tax issue in "circuit after circuit" in the hope of establishing a conflict.
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Date: 1992

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