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Nelson. Rather, they contend that in Nelson we failed adequately
to address the following legal issues: (1) Whether COD income is
an item of income that increases basis; (2) whether COD income
constitutes tax-exempt income which passes through to shareholders;
(3) whether section 108(d)(7)(A) operates as an exception to the
general pass-through scheme of sections 1366 and 1367; and (4)
whether Nelson is inconsistent with our holding in CSI Hydrostatic
Testers, Inc. v. Commissioner, 103 T.C. 398 (1994), affd. per
curiam 62 F.3d 136 (5th Cir. 1995). We disagree with petitioners.
Nelson addressed all of these issues. See Nelson v. Commissioner,
supra at 121-129. Our opinion in Nelson controls the situation
involved herein; consequently, we sustain respondent’s disallowance
of the claimed NOL carryover.5
To reflect the foregoing,
Decision will be entered
for respondent.
5 We are mindful that the U.S. District Court for the
District of Oregon recently held that COD income excluded from
gross income under sec. 108(a) passes through to the shareholders
of an S corporation, allowing them to increase the basis of their
stock under sec. 1367. See Hogue v. United States, ___ F. Supp.
2d ___ (D. Or. Jan. 3, 2000). We believe this decision to be
erroneous.
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Last modified: May 25, 2011