Fontana, Aldo H., Estate, Richard A. Fontana, Co-Executor 318 Jonson, David C. and Estate of Barbara J. Jonson 106 Roberts, Thomas W. South Tulsa Pathology Laboratory, Inc. Square D Company and Subsidiaries Sta-Home Health Agency of Carthage, Inc. Sta-Home Health Agency of Greenwood, Inc. Sta-Home Health Agency of Jackson, Inc. Sta-Home Home Health Agency, Inc. Sta-Home Home Health Agency, Inc., of Forest, Mississippi Sta-Home Home Health Agency, Inc., of Grenada, Mississippi Sunoco, Inc. and Subsidiaries Swain, Elena Todd, John C. and Tate M. Wagner, Richard T. and Margie 365 354 84 155 299 379 379 379 379 379 379 181 358 334 330 579 126 537 REPORTS OF THE UNITED STATES TAX COURT CHARLES C. ALLEN, III AND BARBARA N. ALLEN, ET AL.,1 PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT Docket Nos. 1287-00, 1288-00, Filed January 4, 2002. 1289-00, 1290-00, 1291-00, 1292-00, 1293-00, 1618-00. Ps are the shareholders of F, a subch. S corporation. During its 1994 and 1995 taxable years, F incurred wages that qualified for the targeted jobs credit (TJC) under secs. 38 and 51, I.R.C. F claimed TJCs of $456,264 and $259,434 for the respective years and reported to Ps their proportionate shares of the credits. F reduced its deduction of wages by the amount of the TJCs, pursuant to sec. 280C(a), I.R.C., and reported to Ps their proportionate shares of its resulting net income (F's resulting net income). Ps computed their regular tax liability by including F's resulting net income in their taxable income. Ps were not subject to the alternative minimum tax but had to compute their alternative minimum taxable income (AMTI) in order to ascertain for purposes of sec. 38(c)(1)(A), I.R.C., the tentative minimum tax ceiling on the amount of the TJCs that could be applied against their regular tax liability. Ps computed their AMTI by deducting their proportionate shares of F's full wage expense (i.e., the wage expense unreduced by the TJC). R determined that Ps' AMTI had to be computed 1Cases of the following petitioners are consolidated herewith: John R. Allen and Estate of Sally F. Allen, docket No. 1288-00; John R. Allen, Jr., and Susan S. Allen, docket No. 1289-00; John R. and Judith M. Allen, docket No. 1290-00; Charles C. Allen, Jr., docket No. 1291-00; Warren L. Allen, docket No. 1292-00; Warren L. Allen, Jr., docket No. 1293-00; and Amantha S. Allen, docket No. 1618-00. 1 using F's resulting net income and that the tentative mini- Robert H. Kapp and John S. Stanton, for petitioners. OPINION LARO, Judge: This case was submitted to the Court without trial. See Rule 122.2 Petitioners petitioned the Court to redetermine respondent's determination of the following deficiencies in their Federal income taxes for 1994 and 1995: Following concessions in in docket Nos. 1291-00 and 1292-00, we must decide whether the wage-expense limitation of section 280C(a) enters into the calculation of alternative minimum taxable income (AMTI). As relevant herein, section 280C(a) limits a taxpayer's wage expense to the amount of the expense that exceeds the amount of a targeted jobs credit (TJC) determined under section 51(a). We hold that section 280C(a) enters into the calculation of a taxpayer's AMTI. 2 Rule references are to the Tax Court Rules of Practice and Procedure. Unless otherwise indicated, section references are to the Internal Revenue Code in effect for the subject years. Background All facts were stipulated and are so found. The stipulated facts and the exhibits submitted therewith are incorporated herein by this reference. During the subject years, each petitioner,3 with the exception of Warren L. Allen and Charles C. Allen, Jr., filed a joint Federal income tax return with his wife. Charles C. Allen III was the husband of Barbara N. Allen. John R. Allen was the husband of Sally F. Allen during 1994, and he was the husband of Judith M. Allen during 1995. John R. Allen, Jr., was the husband of Susan S. Allen. Warren L. Allen, Jr., was the husband of Amantha S. Allen. Each petitioner and his wife (with the exception of Sally F. Allen) resided in Delaware when the petitions were filed. Sally F. Allen was deceased at that time, and the executor of her estate was (and is) John R. Allen, Jr. Allen Family Foods, Inc. (Foods), is an S corporation that was incorporated under Delaware law. Its business is the slaughtering, converting, and processing of chickens into ready-to-cook whole chickens and chicken parts for sale primarily to retailers. It computes its income and expenses using an accrual method of accounting and on the basis of a fiscal year ending on the Saturday nearest April 30. It filed a Form 1120S, U.S. Income Tax Return for an S Corporation, for its fiscal years ended in 1994 and 1995 (its 1994 and 1995 taxable years, respectively). Petitioners are descendants of Charles C. Allen, the founder of the family poultry business, and they owned all of Foods' outstanding stock during its 1994 and 1995 taxable years. The number of the shares that they each owned and the percentage of their respective ownership interests were as follows: 3 We hereinafter refer to Charles C. Allen III, Charles C. Allen, Jr., John R. Allen, John R. Allen, Jr., Warren L. Allen, and Warren L. Allen, Jr., as the sole petitioners. |