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constitutes a subchapter S item. Rather, petitioner maintains
that respondent did not propose any such adjustment in the FSAA.
In the alternative, petitioner argues that respondent's position
that COD income is tax-deferred rather than tax-exempt "creates a
distinction without a difference" for purposes of the subchapter
S conduit rules, and that a "question as important as whether
this Court has jurisdiction over a case cannot turn on a
distinction that has no bearing on the substantive application of
the Code."
Notwithstanding petitioner's principal claim, we think that
respondent determined an adjustment in the FSAA to the character
of the COD income reported on Chesapeake's return. The Notice of
Adjustment states in "Remarks" included in the FSAA that "The
discharge of indebtedness income * * * does not pass through to
the Subchapter S Corporation's shareholders as a separately
stated item of tax-exempt income under section 1366(a)(1)."
(Emphasis added.) We think that this statement suffices to
confer jurisdiction, even though the principal thrust of the FSAA
appears to be an erroneous corporate-level denial of basis
adjustment to shareholders. In Clovis I v. Commissioner, 88 T.C.
980, 982 (1987), we stated that "Because of the similar functions
of the FPAA and the statutory notice of deficiency, we are
convinced that the long established principle applicable to
notices of deficiency, viz, that no particular form is necessary,
should apply with equal force to a FPAA." An adjustment to the
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