91-1790
Income
Signed 10/2/92
BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________
XXXXX :
Petitioners, ) FINDINGS OF
FACT,
: CONCLUSIONS OF LAW,
v. ) AND FINAL DECISION
:
AUDITING
DIVISION OF THE ) Appeal No. 91‑1790
UTAH STATE TAX
COMMISSION, :
Account No.
XXXXX )
Respondent. :
_____________________________________
STATEMENT OF
CASE
After submitting briefs on the subject
matter of this case, both Petitioners and Respondent waived the right to a
formal hearing. This decision is based
on the entire contents of the file as presently constituted as of XXXXX.
Based upon the evidence and
information contained in the file, the Tax Commission hereby makes its:
FINDINGS OF FACT
1.
The tax in question is individual income tax.
2.
The period in question is the year XXXXX.
3.
Petitioners are shareholders in XXXXX, a Utah corporation.
4.
This corporation elected to be taxed as an S‑corporation in XXXXX.
5.
The corporation had meals and entertainment expenses for the period in
question.
6.
Pursuant to federal provisions, Petitioners took an 80% deduction on
their federal return for their total portion of meals and entertainment
expenses.
7.
Petitioners then deducted the remaining 20% disallowance in the amount
of $$$$$ on their state tax return.
8.
The issue is whether or not the deduction taken on the state income tax
return is permissible.
CONCLUSIONS OF
LAW
Under Utah law, a small business
corporation having in effect a valid election under subchapter S of the
Internal Revenue Code beginning on or after January 1, 1973 is exempt from the
corporate taxation statutes located at Utah Code Ann. '59‑7‑101 et seq.
As such, subchapter S corporate
shareholders are obligated to follow the personal income tax statutes found at
Utah Code Ann. '59‑10‑101
et seq.
The personal income tax statutes do
not provide for the deduction Petitioners seek; therefore, the deduction is not
allowed.
DECISION AND
ORDER
Petitioners correctly point out that
the Tax Commission has taken the position that the remaining 20% not included
in the federal return is a permissible deduction for corporations. This policy has not been extended to
subchapter S corporations.
Based upon the foregoing, the Tax
Commission finds that the Auditing Division correctly disallowed the deduction
in question. It is so ordered.
DATED this 2 day of October, 1992.
BY ORDER OF THE
UTAH STATE TAX COMMISSION.
R. H. Hansen Roger O. Tew
Chairman Commissioner
Joe B. Pacheco S. Blaine Willes
Commissioner Commissioner
NOTICE: You
have twenty (20) days after the date of the final order to file a request for
reconsideration or thirty (30) days after the date of final order to file in
Supreme Court a petition for judicial review.
Utah Code Ann, ''63‑46b‑13(1),
63‑46b‑14(2)(a).
^^