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losses to be inherited by the estate through the NOL carryover,
the allocation of those losses to Mr. Katz’ bankruptcy estate is
the equivalent of Mr. Katz’ making the section 1398(d)(2) short-
year election.
Petitioners’ argument is flawed in a number of respects,
with the principal error lying in the first assumption–-that the
prepetition partnership losses would have been allocated to Mr.
Katz individually under section 1398(e) had he made the section
1398(d)(2) short-year election. Under section 706(a), a
partner’s share of partnership loss is distributed as of the last
day of the taxable year of the partnership. Given that section
1398(d)(2) affects only the taxable year of the partner, the
short-year election has no effect on the date on which the
partnership loss is deemed to be distributed by the partnership.
In other words, even if Mr. Katz had made the section 1398(d)(2)
election, the prepetition partnership losses would not have been
distributed by the partnerships until the close of the respective
partnership taxable years pursuant to section 706(a). See
Purintun, “Partnerships and Partners in Bankruptcy”, 11 J.
Partnership Taxn. 342, 346 (1995) (“whether or not the debtor
partner makes the short taxable year election, the distributive
share of income or loss from the entire partnership taxable year
in which the partner’s bankruptcy petition is filed should be
included in the return of the estate”); American Bar Association
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