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Louise A. Gitlitz's (the Gitlitzes) 1991 Federal income tax. The
issue for decision is whether Philip D. Winn (Winn) and David A.
Gitlitz (Gitlitz) are entitled to claimed S corporation losses of
approximately $1 million, which in turn depends upon whether Winn
and Gitlitz may increase their respective adjusted bases in the
S corporation stock by their pro rata allocation of discharge of
indebtedness income.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
These matters are before the Court on respondent's motions
for summary judgment filed January 31, 1997, and on petitioners'
cross-motions for partial summary judgment filed March 25, 1997.
Background
At the time their respective petitions were filed, all
petitioners resided in Colorado.
Winn and Gitlitz were shareholders in P.D.W. & A., Inc.
(PDW&A), a Colorado corporation. In 1991, PDW&A had an election
in effect to be taxed as a subchapter S corporation. Effective
January 1, 1992, PDW&A revoked its S corporation election.
PDW&A was a partner in Parker Properties Joint Venture
(Parker). Parker realized $4,154,891 in discharge of
indebtedness income in 1991. PDW&A's distributive share of
Parker's discharge of indebtedness income in 1991 was $2,021,296.
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