- 19 -
to make the section 1398(d)(2) election, the debtor’s taxable
year is determined without regard to the bankruptcy proceeding.12
See sec. 1398(d)(1).
Petitioners contend that, even though Mr. Katz chose not to
make the section 1398(d)(2) election, the allocation of the
prepetition partnership losses to his bankruptcy estate
effectively forces such an election upon him. Petitioners’
argument proceeds along the following lines: First, had Mr. Katz
made the section 1398(d)(2) election, the prepetition partnership
losses would have been allocated to Mr. Katz, thereby generating
an NOL for the first short taxable year. Second, as a
consequence to the making of the section 1398(d)(2) election, the
bankruptcy estate would have succeeded to Mr. Katz’ NOL
carryovers that existed as of July 5, 1990 (the first day of the
second short taxable year), pursuant to section 1398(g)(1).
Third, since the allocation of the prepetition partnership losses
directly to the estate has the same result as allowing those
11(...continued)
filing. See In re Johnson, 190 Bankr. 724, 726 (Bankr. D. Mass.
1995); In re Moore, 132 Bankr. 533, 534 (Bankr. W.D. Pa. 1991);
In re Mirman, 98 Bankr. 742, 745 (Bankr. E.D. Va. 1989); In re
Turboff, 93 Bankr. 523, 525 (Bankr. S.D. Tex. 1988).
12 In the absence of a sec. 1398(d)(2) election, the
debtor’s tax liability for the entire year in which the
bankruptcy proceeding commences is collectible directly from the
debtor individually, with no portion being collectible from the
bankruptcy estate. See In re Smith, 210 Bankr. 689, 692 (Bankr.
D. Md. 1997); In re Johnson, supra at 726; In re Moore, supra at
534; In re Mirman, supra at 745; In re Turboff, supra at 525.
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