8ab710b801444e488d1f19bbf14d28a3f7b942dd.doc. Page 1 of 2
TCM, [CCH Dec. 50,044(M)] , Frank J. Leou, M.D., P.A. v. Commissioner, S corporations: Built-in
gains. (Aug. 17, 1994)
Docket No. 8271-93., TC Memo. 1994-393, 68 TCM 404, Filed August 17, 1994
[Appealable, barring stipulation to the contrary, to CA-8.--CCH.]
S corporations: Built-in gains.--A cash-method medical services business that held accounts receivable on
its last day as a C corporation was required to treat amounts collected on those accounts during the next
year, for which it had elected S status, as net recognized built-in gain. A statutory amendment to the built-
in gain rules, which retroactively applied to the year at issue, clearly extended the application of the rules
to collections on accounts receivable.--CCH.
David J. Wood, 809 W. 2nd St., Little Rock, Ark., for the petitioner. Edsel Ford Holman, Jr. and Robert
B. Nadler, for the respondent.
POWELL, Special Trial Judge:
This case was assigned pursuant to the provisions of
and Rules 180, 181, and 182.
This case was submitted fully stipulated pursuant to Rule 122.
Petitioner is an S corporation engaged in providing medical services. Its principal office was located in
Little Rock, Arkansas, at the time the petition was filed. Petitioner timely filed its Federal income tax
return, Form 1120S, for the taxable year 1988 with the Internal Revenue Service Center in Memphis,
Tennessee. On February 10, 1993, respondent issued a notice of deficiency determining a deficiency in
petitioner's 1988 Federal income tax and an addition to tax under section 6653(a)(1) in the amounts of
$7,567 and $378, respectively. Petitioner timely filed a petition in this Court.
Petitioner is a cash method taxpayer, wholly owned by Frank J. Leou, M.D. Petitioner was originally