222
Breyer, J., dissenting
thereby sheltering other, unrelated income from tax. See Witzel v. Commissioner, 200 F. 3d 496, 497 (CA7 2000) (Posner, C. J.) ("It is hard to understand the rationale for using a tax exemption to avoid taxation not only on the income covered by the exemption but also on unrelated income that is not tax exempt"). Moreover, the benefit often would increase in value as the amount of COD income increases, a result inconsistent with congressional intent to impose a "price" (attribute reduction), see Lipton, Different Courts Adopt Different Approaches to the Impact of COD Income on S Corporations, 92 J. Tax. 207 (2000), on excluded COD. Further, this deduction-related tax benefit would have very different tax consequences for identically situated taxpayers, depending only upon whether a single debt can be split into segments, each of which is canceled in a different year. For example, under the majority's interpretation, a $1 million debt canceled in one year would permit Taxpayer A to deduct $1 million of suspended losses in that year, thereby permitting A to shelter $1 million of unrelated income in that year. But because § 108 reduces tax attributes after the first year, five annual cancellations of $200,000 will not create a $1 million shelter. Timing is all important.
The majority acknowledges some of these policy concerns and confesses ignorance of any "other instance in which § 108 directly benefits a solvent entity," but claims that its reading is mandated by the plain text of § 108(d)(7)(A) and therefore that the Court may disregard the policy consequences. Ante, at 220, n. 10. It is difficult, however, to see why we should interpret that language as treating different solvent shareholders differently, given that the words "at the corporate level" were added "[i]n order to treat all shareholders in the same manner." H. R. Rep. No. 98-432, pt. 2, p. 1640 (1984). And it is more difficult to see why, given the fact that the "plain language" admits either interpretation, we should ignore the policy consequences. See Commissioner v. Gillette Motor Transport, Inc., 364 U. S. 130, 134-135
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