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additional briefs addressing the applicability, if any, of
Nelson.)
In Nelson, a shareholder-level case, we held that COD income
realized and excluded from gross income under section 108(a) does
not pass through to shareholders of a subchapter S corporation as
an item of income in accordance with section 1366(a)(1) so as to
enable an S corporation shareholder to increase the basis of his
stock under section 1367(a)(1). Nelson v. Commissioner, supra at
130. We held in that case that section 108 is not designed or
intended to be a permanent exemption from tax. Excluded COD
income is not "tax-exempt" pursuant to section 1366(a)(1) and,
thus, is not statutorily required to pass through to the S
corporation shareholders. Id. at 125.
We see no need to repeat our detailed exegesis on this issue
contained in Nelson v. Commissioner, supra. We simply hold,
following Nelson, that the COD income in the amount of $995,000
which was excluded from gross income under section 108(a) by
Chesapeake on its return for TYE March 19, 1992, is not a
separately stated item of tax-exempt income for purposes of
section 1366(a)(1)(A).
We have considered the parties' remaining arguments and, to
the extent they are not discussed herein, find them to be either
not germane or unconvincing.
To reflect the foregoing and issues previously conceded,
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