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of deficiency invalid as to items where there has not been a
prior entity-level proceeding are not in point. See Roberts v.
Commissioner, 94 T.C. 853, 860-861 (1990). As detailed in our
findings of fact, no direct references were made and no
explanations were provided in Zephyr’s Forms 1120S as to the
amounts that Zephyr received from PK Ventures and its
subsidiaries for years prior to 1990. On its Form 1120S for
1990, Zephyr represented that “No income or expense items where
[sic] reported on the tax return due to the fact that the
corporation was not solvent after the completion of the
bankruptcy.” Petitioners now argue that cancellation of
indebtedness income was reflected on Zephyr’s return in an
attachment, although not on the face of the return, because
(1) Zephyr’s net loss from operations was eliminated by the
amount of excluded COD income and (2) in Schedule L to the
Form 1120 for 1990, assets and liabilities were eliminated and
retained earnings were increased to reflect COD income of
$7,144,750 that was excluded under section 108.
Petitioners would have the notice of deficiency make an
affirmative adjustment in the absence of an entity-level
proceeding reflected in an FSAA. Respondent contends that the
claim of increased basis could have been raised by the Roses in
an administrative adjustment request under section 6227 but that
such a request is now barred. We conclude, however, that the
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