562 F.3d 730 (2009) Linda K. MINTON, Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Appellee. No. 08-60284. United States Court of Appeals, Fifth Circuit. March 13, 2009. *731 William Alan Pesnell (argued), Pesnell Law Firm, Shreveport, LA, for Minton. Bethany Buck Hauser (argued), Thomas J. Clark, Nathan J. Hochman, Teresa T. Milton, U.S. Dept. of Justice, Tax Div. Appellate Section, Washington, DC, Robert R. Di Trolio, Clerk, Tax Court, Clarissa C. Potter, I.R.S., Washington, DC, for C.I.R. Before JONES, Chief Judge, JOLLY, Circuit Judge, and CARDONE,[*] District Judge. PER CURIAM: In this appeal from the Tax Court, Linda Minton argues that a transaction among her, her parents, and her brother, all of whom were shareholders of Long's Preferred Products, Inc., created a second class of stock thereby terminating the company's status as a small business corporation. The Tax Court determined that the transaction did not create a second class of stock, and the court sustained the deficiency assessed against Minton. We agree with the Tax Court's determination and affirm its judgment. I. A. Generally the income of a corporation is taxed twice, once at the corporate level and again at the shareholder level when the money is distributed as dividends. A small business corporation, however, may avoid this onerous double taxation by electing to be an S corporation ("S-corp"). Gitlitz v. Comm'r, 531 U.S. 206, 209, 121 S.Ct. 701, 148 L.Ed.2d 613 (2001). An S-corp, as a pass-through entity, does not have to pay income tax. I.R.C. § 1363(a). Instead, each shareholder must pay tax on his pro rata share of the corporate profits. Id. § 1366(a)(1); Gitlitz, 531 U.S. at 209, 121 S.Ct. 701; Nail v. Martinez, 391 F.3d 678, 681 (5th Cir.2004). Only corporations that conform to the Internal Revenue Code's definition of a "small business corporation" may elect to *732 be an S-corp. The Code's definition limits small business corporations to those corporations that, among other characteristics, have only one class of stock. I.R.C. § 1361(b)(1)(D). If an S-corp issues a second class of stock, it ceases to fit the definition of a small business corporation, and its S-corp status is automatically terminated. Id. § 1362(d)(2)(A). B. Long's Preferred Products, Inc. ("LPP") is a family-owned janitorial and paper-supply company. Julian E. Long ("Julian") and his wife Alma Long started LPP in the 1950s and incorporated the business in 1976. Soon after its incorporation, LPP sought and received S-corp treatment. At the time, Julian and Alma were the sole owners of LPP's one hundred outstanding shares. As Julian and Alma aged, their children, Julian W. "Dooksie" Long ("Dooksie") and Linda Minton, gradually took control of the company. In 1986, Minton and Dooksie each supposedly purchased nineteen shares from their parents. Minton asserts that in exchange for these shares Alma and Julian received monthly distributions from LPP. Julian and Alma initially received $4,000 per month, but the amount was reduced to $2,000 when Alma died in 1990. There are no executed documents reflecting any of these transactions. By 1996, through …
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