Consolidated Industries, Inc., Joseph C. Valentine and Shirley R. Valentine, Ronald J. Clayton and Jane H. Clayton v. Commissioner of Internal Revenue

Consolidated Industries, Inc., a Connecticut corporation, its shareholders, Joseph C. Valentine and Ronald J. Clayton, and their wives, appeal from decisions of the United States Tax Court dated January 16, 1985 involving deficiencies in the income tax liabilities of the individual petitioners.

The corporation is an accrual basis, calendar year taxpayer. The individual taxpayers are officers of the corporation and own all of its stock. In 1976 the corporation elected to be taxed under Subchapter S of the Internal Revenue Code which permits its profits to be passed through and taxed to the…