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II.
I mush on in an attempt to make sense of the stipulated
record and arrive at an understanding of what happens to the
current year’s losses of an insolvent S corporation that
experiences COD. The case at hand is not the most satisfactory
vehicle for this purpose because the stipulation of facts is so
terse--the only documents in evidence are the statutory notice,
petitioner’s 1991 income tax return, and MAI’s 1991 Form 1120S--
as to raise and leave unanswered questions about what actually
happened and the significance of what was shown and claimed on
the MAI Form 1120S and petitioner’s return.3
Judge Foley’s reference to the “application of section
108(b) and the resulting reduction of tax attributes (i.e., MAI’s
net operating loss)” adverts to an issue that the parties didn’t
really address. This issue arises from the fact, which might be
inferred from the parties’ stipulation “that the COD income of
$2,030,568 exceeded losses of MAI by $1,375,790 in 1991", that,
as respondent asked the Court to find as a fact, “MAI had losses
of $654,778". The amount by which MAI’s COD of $2,030,568
exceeded those losses is $1,375,790, the portion of petitioner’s
claimed basis in the stock of MAI that respondent disallowed.
2(...continued)
didn’t file a Form 982 of its own with its 1991 Form 1120S.
3 Perhaps the Rule 155 computation to be submitted by the
parties will clarify these matters.
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