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Creditors of The Chamberlin Corp. filed an involuntary
petition in bankruptcy against the company on December 17, 1984.
However, The Chamberlin Corp. continued to operate and sought
outside investment in a quest to avoid involuntary bankruptcy
until at least March 1985. Until the company accepted its
involuntary bankruptcy fate in 1985, there was a reasonable
possibility that the company could be saved and that petitioner
could recover some or all of his $450,000 loan to The Chamberlin
Corp. See Morton v. Commissioner, supra at 1278.
Personal Bankruptcy
Having decided the amount and timing of losses sustained by
petitioners and the amount of losses sustained by their
bankruptcy estate, the next issue for decision is the effect that
petitioners’ personal chapter 11 bankruptcy had on these losses.
Upon the filing of a voluntary chapter 11 petition in
bankruptcy, certain tax attributes listed in section 1398(g)
become property of the bankruptcy estate and are no longer tax
attributes of the taxpayer. Section 1398(g) reads as follows:
SEC. 1398(g) Estate Succeeds to Tax Attributes of
Debtor.--The estate shall succeed to and take into
account the following items (determined as of the first
day of the debtor’s taxable year in which the case
commences) of the debtor--
(1) Net operating loss carryovers.--The net
operating loss carryovers determined under section
172.
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