Chapman Glenn v. Commissioner
Jan 01, 2013OUTCOME:
In 1998, P was a foreign insurance company that elected under I.R.C. sec. 953(d) to be treated as a domestic corporation for U.S. Federal income tax purposes. G signed the election in G’s reported c ... apacity as P’s secretary. P also applied for and was granted tax-exempt status as an insurance company effective Jan. 1, 1998. For 2003, P filed a Form 990, Return of Organization Exempt From Income Tax, that was not signed by one of P’s officers. In 2009, three years after P consented to R’s revocation of P’s tax-exempt status effective Jan. 1, 2002, R determined that (1) P’s election was terminated in 2002 because P was not an insurance company in that year and (2) P was therefore deemed under I.R.C. secs. 354, 367, and 953(d)(5) to have sold its assets on Jan. 1, 2003, in a taxable transaction. P’s primary asset on Jan. 1, 2003, was its investment in a disregarded entity (E) that owned various pieces of real property. Held: The three-year period of limitations under I.R.C. sec. 6501(a) remains open as to 2003 because P’s Form 990 was not a valid return in that it was not signed by one of P’s corporate officers. Held, further, P properly elected under I.R.C. sec. 953(d) to be treated as a domestic corporation, and the termination of that election in 2002 resulted in P’s making a taxable exchange under I.R.C. secs. 354, 367, and 953(d)(5) during a one-day taxable year commencing and ending on Jan. 1, 2003. Held, further, E’s real property is included in that taxable exchange, and the fair market value of the real property is determined. Held further, P’s gross income does not include amounts that R determined were ‘‘insurance premiums’’, and R may not for the first time in R’s posttrial opening brief recharacterize the premiums as a different type of taxable income.