that because Export did not qualify as a DISC, RMAI was not taxable on the deemed distribution from Export but that the accrued commissions payable to Export were not deductible by RMAI. Petitioners maintain that even if Export did not qualify as a DISC for the year in issue, Export was a viable corporation and therefore the commission income to which Export was entitled was taxable to Export, and RMAI was entitled to a deduction for the commission payable to Export as of October 31, 1980. We agree with respondent's determination insofar as RMAI is concerned, but we do not agree with his determination insofar as Export is concerned. We agree with petitioners that Export was a viable corporation, but we disagree with their proposed tax treatment of Export and RMAI. Once a corporation loses its DISC qualification, section 991 no longer applies and the former DISC is taxable as a domestic corporation for the income it has earned for the taxable year in which it loses its DISC status. Addison International, Inc. v. Commissioner, 90 T.C. 1207 (1988), decided this date. Accordingly, Export was taxable as a domestic corporation for the taxable year ended October 31, 1980. However, Export did not earn any income for the taxable year ended October 31, 1980. None of the $361,699 Export reported as income on its amended return for the taxable year ended October 31, 1980, attributable to the backdated note to Export from RMAI, was ever paid by RMAI, as discussed supra at page 1239 of this opinion. Because Export failed to qualify as a DISC for the taxable year ended October 31, 1980, RMAI is not taxable on the $180,741 it reported as deemed dividend income from Export on its return for the calendar year 1980. However, we must also disallow the deduction claimed by RMAI as a commission expense in the amount of $361,699 for its taxable year 1980. As we have stated previously, Export did not earn any commission income for its taxable year ended October 31, 1980. Accordingly, RMAI did not incur a commission expense under the agreement. Moreover, we have found that RMAI never paid any commissions nor did it accrue any commissions. Furthermore, the evidence shows that RMAI did not intend to pay Export a commission during the taxable year ended October 31, 1980. As we explained earlier, Export's books and records and tax return refer to the amount in question as a producer's loan. The note, itself, recites that it represents a producer's loan. Therefore, RMAI is not entitled to deduct any commission expenses attributable to Export for its taxable year 1980. To reflect the foregoing, Decision will be entered under Rule 155. Reviewed by the Court. PARKER, SHIELDS, COHEN, JACOBS, WRIGHT, PARR, WILLIAMS, and WELLS, JJ., agree with the majority opinion. STERRETT, J.,* concurs in the result only. WHITAKER, J., concurring: This is a companion case to Addison International, Inc. v. Commissioner, 90 T.C. 1207 (1988), in which I joined the dissenting opinion of my colleague, Judge Ruwe. Since it appears in this case that no income was earned by Export-the DISC-Judge Ruwe's analysis in his dissent in Addison would produce in this case the same result as that reached by the majority. For that reason, I concur in the result only. KÖRNER, J., agrees with this concurring opinion. SWIFT, J., dissenting: The majority concludes that Export is to be taxed as a domestic corporation for its taxable year ending October 31, 1980. As a domestic corporation and as an accrual basis taxpayer,1 Export is governed by the *This opinion was reviewed by the Court prior to Chief Judge Sterrett's resignation from the Court. 'Although the majority does not expressly state that Export is an accrual basis taxpayer, such is implied by the majority's opinion at page 1233 that $308,443 of commissions receivable was reportable on Export's 1980 tax return. principal of the accrual method of tax accounting under which receivables are included in taxable income in the year all events occur which fix Export's right to that income. Sec. 1.446-1(c)(1)(ii), Income Tax Regs.; Spring City Foundry Co. v. Commissioner, 292 U.S. 182, 184 (1934); Chesapeake Financial Corp. v. Commissioner, 78 T.C. 869, 877 (1982). The above principle of the acrual method of accounting is not affected by when receivables are actually received, nor by whether a taxpayer establishes a bookkeeping account reflecting its entitlement to the receivables. As the Supreme Court stated it is the right to receive and not the actual receipt that determines the inclusion of the amount in gross income. When the right to receive an amount becomes fixed, the right accrues. [Spring City Foundry v. Commisioner, supra at 184. Emphasis in original.] Based on the majority's factual finding that (under the commission agreement between Export and RMAI) Export was entitled to $308,443 in commissions from RMAI at the end of its 1980 taxable year, Export should be required to accrue that amount in its 1980 taxable income. If RMAI is an accrual basis taxpayer (which is unclear from the majority's opinion), then under the same tax accounting principle, RMAI should be entitled to accrue the $308,443 as a commission expense deduction on its 1980 tax return. See United States v. General Dynamics Corp., 481 U.S. (1987). CHABOT, GERBER, RUWE, and WHALEN, JJ., agree with this dissent. 111 WEST 16 STREET OWNERS, INC., ALAN SILVERMAN, TAX MATTERS PERSON, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT P, tax matters person for an S corporation having three shareholders in 1983, moved to dismiss this case for lack of jurisdiction. P argues that for 1983, an S corporation having 10 or fewer shareholders is excepted as a "small S corporation" from the application of the S corporation audit and litigation procedures because R failed to promulgate modify- Geoffrey J. O'Connor, for the petitioner. OPINION WILLIAMS, Judge: This case is before the Court on petitioner's motion to dismiss for lack of jurisdiction. The Commissioner determined adjustments to 111 West 16 Street Owners, Inc.'s (Owners) S corporation return for its 1983 taxable year as set forth in a Notice of Final S Corporation Administrative Adjustment. Petitioner's position is that Owners was not subject to the S corporation audit and litigation procedures (secs. 6241 et seq.1), in 1983 because it was a small S corporation having only three shareholders. Respondent argues that in 1983 there was no exception from the S corporation audit and litigation procedures for S corporations having three shareholders. The relevant facts are not in dispute. Petitioner Alan Silverman is the tax matters person of Owners, a corporation having its principal place of business at New York, New York, at the time the petition was filed. Owners' election to be taxed as a subchapter S corporation was in effect for the year at issue. In 1983 Owners had three shareholders. On March 4, 1987, respondent mailed a Notice of Final S Corporation Administrative Adjustment to petitioner. Petitioner timely filed a petition with this Court seeking readjustment of respondent's determinations. On February 1All section references are to the Internal Revenue Code of 1954 as in effect for the year in issue unless otherwise specified. 1, 1988, petitioner filed his motion to dismiss for lack of jurisdiction on the ground that Owners was exempt from the S corporation audit and litigation procedures as a small S corporation. On March 8, 1988, respondent filed his notice of objection. We held a hearing on petitioner's motion in New York City on April 11, 1988. Petitioner urges us to reconsider and reject the rationale of Blanco Investments & Land, Ltd. v. Commissioner, 89 T.C. 1169 (1987). Petitioner believes that we properly read section 6244 to mandate an exception from the S corporation audit and litigation procedures for small S corporations, but that we erroneously concluded that the statute did not require a strict adherence to the small partnership exception. Petitioner argues that the small S corporation exception must apply to S corporations having 10 or fewer shareholders. If the statute so provided, we would lack jurisdiction in this case. 89 T.C. at 1173. Respondent now agrees with our reasoning in Blanco. He concedes that the statute mandates an exception for small S corporations and further agrees that, as administrator, he is responsible for setting the qualifying number of shareholders for the exception at a number greater than one. Blanco presented the issue of the applicability of the small s corporation exception for a corporation having a single shareholder. In this case, respondent asks us to decide finally that the small S exception cannot be applied, in the absence of regulations, to S corporations having more than one shareholder. At the outset, we note that the issue here, though having great administrative significance, is limited to S corporations having a due date for their tax returns before January 30, 1987. Respondent's temporary regulations, providing an exception for S corporations with five or fewer shareholders, apply to S corporations the due date of the returns for which are on or after January 30, 1987. Sec. 301.62411T(c)(2)(i), Temporary Proced. & Admin. Regs., 52 Fed. Reg. 3003 (Jan. 30, 1987); Blanco Investments & Land, Ltd. v. Commissioner, 89 T.C. at 1172-1173. In Blanco, we stated that: If we were to set the number of shareholders an S corporation may have and still qualify for a small S corporation exception, we would be |