Dan E. Mason and Beverly R. Mason v. Commissioner of Internal Revenue

The tax court held that the Masons properly deducted from their 1967 gross income the losses of a Subchapter S corporation. 68 T.C. 163 (1977). We affirm.

Dan E. Mason 1 formed a corporation, Arrow Equipment Sales (“Arrow”), from his solely owned business. Arrow made a valid election to be treated as an electing small business corporation under Subchapter S of the Internal Revenue Code, for the taxable year beginning January 1, 1967. On January 17, 1967, Arrow filed a voluntary petition in bankruptcy. The trustee sold some equipment for substantial losses and abandoned the remainder of the…