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petitioner, and its losses after July 11, 1991, are allocated to
the bankruptcy estate because petitioner’s filing of the petition
in bankruptcy (and the bankruptcy estate’s succession to
ownership of his interest in GSD) caused a change in ownership of
that interest. We disagree.
Petitioners point out that in Smith v. Commissioner, supra,
the Commissioner disallowed a pro rata portion of losses from
real estate rentals; i.e., allowed the losses to the taxpayer for
the part of the year before he filed in bankruptcy. Petitioners
apparently contend that the Commissioner followed the same
procedure for the taxpayers’ partnership losses; however, the
opinion in Smith makes clear that the taxpayers failed to prove
the amount of partnership losses or that they were incurred
before the taxpayers filed in bankruptcy. Thus, Smith is silent
on the point for which petitioners cite it here.
Income, gain, loss, deduction, and credit of a partnership
are treated as if received by the partner on the last day of the
partnership’s tax year. See sec. 706(a). Thus, if a partner
commences a bankruptcy case before the last day of the partner’s
tax year and the bankruptcy estate holds the partnership interest
on the last day of that year, then that partner’s share of any
income, gain, loss, deduction, or credit of the partnership is
treated as earned by the bankruptcy estate.
The bankruptcy estate succeeded to petitioner’s interest in
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