Edward J. Prescott and Wanda D. Prescott v. Commissioner of Internal Revenue, L. W. Simpson and Shirley Simpson v. United States

WEBSTER, Circuit Judge.

These two appeals, both of which turn on the validity of Treas.Reg. § 1.1361-16(b), have been consolidated for disposition in this Court. 1 In both cases, taxpayers chal lenge the action of the Internal Revenue Service in treating the termination of elections by § 1361 “corporations” as resulting in taxable liquidations.

Under 26 U.S.C. § 1361, 2 as enacted in 1954, a proprietor or partnership owning an unincorporated business enterprise could elect to be treated as a corporation for tax purposes. The election could be .made within sixty days of the close of any taxable…