FAVORABLE DECISION FOR SHAREHOLDERS OF INSOLVENT S CORPS.

Resolving a split among the 3rd, 6th, 7th, 10th and 11th Circuit Courts of Appeals, the U.S. Supreme Court decided Jan. 9 that an insolvent S corporation's debt discharge income increased the basis of the shareholders stock in the corporation--even though this income was excluded from taxation. This increased basis permitted the shareholders to currently deduct their share of the corporation's operating losses. Refund claims should be filed, if appropriate, to reflect the high court's decision. (David A. Gitlitz, El Ux, Et Al v. Comm., No. 99-1295.)