Romano v. Weiss

The plaintiffs Hugh and Mary Romano were the principal shareholders 3 of Fidelity Press, Inc., a cor poration which had been taxed since 1958 as an electing small business, or subchapterS, corporation. See 26 U.S.C. §§ 1371 et seq. (1970) . 4 The distinguishing feature of such a corporation is that corporate earnings (or losses) pass through and are taxed (or credited) directly to the shareholders, in proportion to their ownership interests, rather than to the corporation itself. The earnings pass-through occurs whether or not the earnings are actually distributed to the shareholders. Under…