Discussion
Petitioners argue that, even though they did not make the
short-taxable-year election under section 1398(d)(2), they should
be allowed to use the 1990 NOL in the year of discharge first to
reduce their 1991 income, before the inevitable reduction by the
amount of the discharge. They base this argument on their
interpretation of section 108(b)(4) and section 108(d)(8).
Section 108(d)(8), which specifies the estate as the taxpayer,
does not specifically refer to the ordering rule of section
108(b)(4) and confines such reference to paragraphs (1) and (5)
of subsection (b) of section 108. Thus, according to
petitioners, the reductions under section 108(b) occur after the
individual taxpayer, not the estate, determines his or her tax
liability for the year of discharge pursuant to section
108(b)(4), using whatever tax attributes are left in the
bankruptcy estate. In other words, petitioners claim that the
individual taxpayer gets one last chance to use up the NOL before
it is reduced by the amount of debt discharged.
We divide our analysis into two parts.
First, we dispose of the question whether the 1990 NOL is
available to petitioners as a carryforward to 1991. The answer
to this question is clearly in the negative. Upon the filing of
the petition in bankruptcy on December 6, 1991, the NOL passed to
the bankrupt estate and belonged to the estate until discharge on
March 18, 1992. Mr. Kahle did not file an election to adopt a
short taxable year in respect of which the 1990 NOL could have
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