Lawrence G. Williams - Page 2

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                    2.  Held, further, net operating losses to which P                
               succeeded upon discharge in bankruptcy must be reduced                 
               by the amount of discharge of indebtedness income that,                
               pursuant to sec. 108(b)(2), I.R.C., was excluded from                  
               his gross income as a result of his bankruptcy                         
               discharge.                                                             
                    3.  Held, further, P is not liable for the                        
               accuracy-related penalty under sec. 6662(a), I.R.C.,                   
               for any year at issue.                                                 


               Lawrence G. Williams, pro se.                                          
               Lydia A. Branche, for respondent.                                      


               KROUPA, Judge:  Respondent determined deficiencies in                  
          petitioner’s income taxes for the years 1996 through 2000                   
          resulting from operating losses sustained by two S corporations             
          in 1990 that petitioner reported on his individual tax return in            
          1990, the year in which petitioner filed for bankruptcy, and                
          carried forward through 2000.1  Respondent also determined that             
          petitioner is liable for the accuracy-related penalty under                 
          section 6662(a) for each year at issue.                                     
               The three issues for decision are:                                     
               (1) Whether petitioner or his individual bankruptcy estate             
          (Estate) is entitled to report operating losses sustained during            
          1990 by two S corporations in which petitioner owned all of the             
          shares as of the date of filing bankruptcy.  We hold that the               
          Estate, not petitioner, is entitled to report the losses.                   

               1Petitioner originally filed a ch. 7 bankruptcy petition on            
          Dec. 3, 1990, then converted it to a ch. 11 bankruptcy in 1991.             
          The conversion is irrelevant for purposes of our analysis because           
          secs. 108 and 1398 apply to both chapters if the debtor is an               
          individual.                                                                 




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