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and the estate is treated as the debtor would be treated with
respect to that asset. Therefore, the Estate is treated as if it
had owned all the shares of Davidge and Kuma for the entire year
and, accordingly, is entitled to the entire loss that each of
Davidge and Kuma generated during 1990, including the loss
attributable to each corporation for the period January 1 through
December 3, 1990.
Section 1398(e)(1) specifically addresses how income or loss
should be allocated between the individual debtor and the
bankruptcy estate. The bankruptcy estate is entitled to the
individual debtor’s items of income or loss from the bankruptcy
commencement date under section 1398(e)(1) while any items of
income or loss that the individual debtor received or accrued
before filing for bankruptcy remain with the debtor.10
We find that petitioner did not receive or accrue any items
of income or loss from Davidge or Kuma in 1990 before he filed
for bankruptcy. Income or loss of an S corporation is determined
as of the last day of the corporation’s taxable year. We find
that, because petitioner filed for bankruptcy before the last day
of the S corporations’ tax year, losses of the corporations for
that year flow through in their entirety to the bankruptcy
estate, and in no part to him.
We held similarly in the partnership context in Gulley v.
Commissioner, T.C. Memo. 2000-190. In Gulley, we interpreted
section 1398 as it pertained to a partnership interest of an
10The parties stipulated that petitioner did not elect to
bifurcate the 1990 tax year into short, prepetition and
postpetition, years pursuant to sec. 1398(d)(2).
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