- 3 -
$126,979). This loss exceeded petitioner's basis in his Impact
stock. As a result, petitioner's basis was reduced to zero, and
$99,148 of the loss was suspended.
Petitioner's share of the 1993 loss was $291,815 (95 percent
of $307,174). Again, petitioner's basis in his Impact stock was
reduced to zero and an additional $288,806 loss was suspended.
In 1994, Impact reported a further loss of $204,245.
Petitioner's share of this loss was $194,033. During 1994,
Impact made an assignment of its assets for the benefit of its
creditors. In consummating this transaction, Impact realized COD
income.3 Impact was insolvent when it realized this COD income.
As a result, it excluded the income.4 Petitioner increased his
Impact stock basis by $532,210 to reflect his share of the COD
income.
Discussion
The principal issue for our consideration in this case is
whether petitioner is entitled to an increase in his basis in an
3There appears to be a discrepancy in the stipulated facts
with respect to the amount of COD income Impact realized in 1994.
The parties stipulated that the total amount the corporation
realized was $532,210. However, they also stipulated that
petitioner increased his Impact stock basis by $532,210 to
reflect his share of the COD income. Since petitioner owned only
95 percent of Impact's stock, the total amount of COD income
would have had to be $560,221 for petitioner's share to be
$532,210. Since our ultimate conclusion is that none of the COD
income flowed through to petitioner or had any impact on his
personal income taxes, we need not inquire further into this
discrepancy.
4See sec. 108(a)(1)(B).
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