Lawrence G. Williams - Page 1

                                   123 T.C. No. 8                                     

                               UNITED STATES TAX COURT                                

                         LAWRENCE G. WILLIAMS, Petitioner v.                          
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket Nos. 10314-02, 3262-03.     Filed July 22, 2004.                

                    P filed for bankruptcy on Dec. 3, 1990, at which                  
               time he owned all of the shares of two S corporations.                 
               Both S corporations sustained operating losses for                     
               1990.  P reported the pro rata portion of the 1990                     
               losses attributable to the prebankruptcy period on his                 
               individual tax return for 1990, resulting in a net                     
               operating loss, which he carried forward through 2000.                 
               P was discharged in bankruptcy in 1997.  R disallowed                  
               the losses and issued notices of deficiency for 1996-                  
                    1.  Held:  Where P, an individual S corporation                   
               shareholder, filed for bankruptcy before the                           
               corporation’s yearend, operating losses sustained by                   
               the corporation during the year in which he filed for                  
               bankruptcy are reported by the bankruptcy estate, not                  
               P, because income or loss of an S corporation is                       
               determined as of the last day of the corporation’s                     
               taxable year.                                                          

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