No. 95-1023

IN THE SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1995

TWENTY-THREE NINETEEN CREEKSIDE, INC.,
MICHAEL E. BALDIGO, PETITIONER

v.

COMMISSIONER OF INTERNAL REVENUE

ON PETITION FOR A WRIT OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE NINTH CIRCUIT

MEMORANDUM FOR THE RESPONDENT
IN OPPOSITION

DREW S. DAYS, III
Solicitor General

Department of Justice
Washington, D.C. 20530
(202)514-2217
In the Supreme Court of the United States

---------------------------------------- Page Break ----------------------------------------

  OCTOBER TERM, 1995

     No. 95-1023

TWENTY-THREE NINETEEN CREEKSIDE, INC.,
MICHAEL E. BALDIGO, PETITIONER

v.

COMMISSIONER OF INTERNAL REVENUE

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
    FOR THE NINTH CIRCUIT

MEMORANDUM FOR THE RESPONDENT
     IN OPPOSITION

Petitioner, a corporation with three shareholders,
elected to be taxed as an "S corporation" under
Subchapter S of the Internal Revenue Code, 26 U.S.C.
1361-1379. Petitioners challenge certain adjustments
made by the Commissioner of Internal Revenue to its
return for the taxable year ending June 30, 1984.
1. This is a companion case to Alvis M. Rushton v.
Commissioner of Internal Revenue, No. 95-846. The
petitioner in Rushton also sought review of the ad-
justments to the corporation's return for the taxable
year ending June 30, 1985. For the reasons stated in
the brief in opposition to the petition for a writ of

(1)

---------------------------------------- Page Break ----------------------------------------

 2

certiorari in the Rushton case, which was filed on
December 28, 1995, the petition in this case should
also be denied.*
2. Petitioner's further contention (Pet. 14-17) that
Michael E. Baldigo was not the tax matters person of
CreekSide provides no basis for further review. Peti-
tioner's contention is based on the fact that another
individual, Alvis M. Rushton, held 100 percent of the
shares in CreekSide as of October 1, 1984 (Pet. 15).
Pursuant to Section 6231(a)(7)(B) and 6244 of the
Internal Revenue Code, the tax matters person of a
Subchapter S corporation is either the shareholder
designated by the corporation or, in the absence of
such a designation, the shareholder "having the larg-
est profits interest in the [corporation] at the close of
the taxable year involved" (26 U.S.C. 6231(a)(7)(B)).
The term "taxable year" is defined as "the calendar
year, or the fiscal year ending during such taxable
year, upon the basis of which the taxable income
is computed under subtitle A [Income Taxes]."
26 U.S.C. 7701(a)(23). The term "fiscal year" is de-
fined as "an accounting period of 12 months ending on
the last day of any month other than December."
26 U.S.C. 7701(a)(24).
It is undisputed that petitioner filed its tax return
for 1984 on the basis of a fiscal year ending June 30,
1984, that it did not designate a tax matters person for
that taxable year, and that Baldigo owned 72 percent
of the shares in Creekside at all times during the
taxable year (Pet. App. A6-A7, A43). The court of
appeals correctly looked to the close of Creekside's

fiscal year ending June 30, 1984, to
       
___________________(footnotes)

* We are providing a copy of the brief in opposition filed in
No. 95-846 to petitioner.

--------------------------------------- Page Break ----------------------------------------

3

matters person, and the court correctly identified
Baldigo as the person having the largest profits
interest on that date (Pet. App. A6-A9). Baldigo's
subsequent sale of his entire interest to Rushton on
October 1, 1984, occurred during Creekside's 1985
fiscal year (id. at A3, A7) and is therefore irrelevant
to the determination of the tax matters person for the
1984 taxable year.

It is therefore respectfully submitted that the
petition for a writ of certiorari should be denied.

DREW S. DAYS, III
Solicitor General

JANUARY 1996