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that opinion was whether discharge of indebtedness income from an
S corporation increases petitioners' basis in that corporation.
We held that it does not, following Nelson v. Commissioner, 110
T.C. 114, 130 (1998), affd. 182 F.3d 1152 (10th Cir. 1999).
Background
Petitioners were shareholders in Mikama, Inc. (Mikama), an S
corporation, from 1988 to 1995. From 1987 to 1995, Mikama was a
general partner with a 10-percent interest in a limited
partnership known as Dove Canyon Co. (Dove Canyon). Dove Canyon
realized $20,345,080 in discharge of indebtedness income in 1992
and $11,887,728 in 1993. The parties agree that, if petitioners
may increase their basis in Mikama by the discharge of
indebtedness income, no deficiencies in income tax are due from
petitioners for 1993, 1994, and 1995.
Discussion
In Gitlitz v. Commissioner, 531 U.S. ____, 121 S. Ct. 701
(2001), the Supreme Court held that a shareholder of an insolvent
S corporation may increase his or her basis by his or her pro
rata share of discharge of indebtedness income to the S
corporation, contrary to our holding in Nelson v. Commissioner,
supra. The parties agree that Gitlitz controls here.
Accordingly, petitioners’ motion for reconsideration will
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