What settlement terms will the taxpayer be expected to agree to if no cash or property payments were made to the Management S Corporation by the operating business?
A.5. If no cash or property payments were made to the Management S Corporation by the operating business, then the taxpayer must agree to the following settlement terms: 1. In the first taxable year for which the period of limitations on assessment under IRC Section 6501(a) has not expired (IRC Section 6501(a) open year), the operating business must include in income the total amount of the accrued payables (attributable to management service fees) to the Management S Corporation that were deducted in all years prior to the first IRC Section 6501(a) open year; 2. In all IRC Section 6501(a) open years, the operating business must eliminate the current year deduction for management service fees accrued to the Management S Corporation.
