                       T.C. Memo. 2001-54



                     UNITED STATES TAX COURT



  ESTATE OF MICHAEL A. CONVISER, DECEASED, BARBARA L. CONVISER,
PERSONAL REPRESENTATIVE, AND BARBARA L. CONVISER, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent*



     Docket No. 17468-97.                Filed March 6, 2001.



     Robert A. Wherry, Jr., for petitioners.

     Robert A. Varra, for respondent.



                 SUPPLEMENTAL MEMORANDUM OPINION


     COLVIN, Judge: The case is before the Court on petitioners’

motion to reconsider our prior opinion in this case, Conviser v.

Commissioner, T.C. Memo. 1999-47.   The sole issue for decision in


     *
      This opinion supplements Conviser v. Commissioner, T.C.
Memo. 1999-47.
                                  -2-

that opinion was whether discharge of indebtedness income from an

S corporation increases petitioners' basis in that corporation.

We held that it does not, following Nelson v. Commissioner, 110

T.C. 114, 130 (1998), affd. 182 F.3d 1152 (10th Cir. 1999).

                            Background

     Petitioners were shareholders in Mikama, Inc. (Mikama), an S

corporation, from 1988 to 1995.     From 1987 to 1995, Mikama was a

general partner with a 10-percent interest in a limited

partnership known as Dove Canyon Co. (Dove Canyon).    Dove Canyon

realized $20,345,080 in discharge of indebtedness income in 1992

and $11,887,728 in 1993.   The parties agree that, if petitioners

may increase their basis in Mikama by the discharge of

indebtedness income, no deficiencies in income tax are due from

petitioners for 1993, 1994, and 1995.

                            Discussion

     In Gitlitz v. Commissioner, 531 U.S. ____, 121 S. Ct. 701

(2001), the Supreme Court held that a shareholder of an insolvent

S corporation may increase his or her basis by his or her pro

rata share of discharge of indebtedness income to the S

corporation, contrary to our holding in Nelson v. Commissioner,

supra.   The parties agree that Gitlitz controls here.

Accordingly, petitioners’ motion for reconsideration will
                                  -3-

be granted, and petitioners may increase their basis in Mikama by

their share of the Dove Canyon discharge of indebtedness income.

     To reflect the foregoing,

                                        An appropriate order will be

                                 issued, and decision will be

                                 entered for petitioners.
