The Treasury's recent amendment of its regulation regarding the treatment of purported debt obligations as a second class of stock for purposes of Subchapter S election represents a more defensible interpretation of the statute. However, since the regulation calls for an application of the principles of the thin incorporation doctrine to an area in which they are seemingly irrelevant, many Subchapter S corporations may be subjected to excessive penalties. This comment explores the decisional authority preceding the amendment, and examines the propriety of analyzing the one-class-of-stock requirement in terms of thin incorporation precepts.

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