| Course | AC566 Tax Research and Intro to International Taxation |
|---|---|
| Unit | Unit 3 |
| Paper type | Citator exercise |
| Length | About 560 words, 5 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MS in Accounting |
| Updated | October 2026 |
Free sample paper for AC566 Unit 3
A Supreme Court Win Congress Took Back: A Unit 3 Citator Exercise on Gitlitz v. Commissioner
[Student Name]
Purdue University Global
AC566: Tax Research and Intro to International Taxation
Unit 3 Citator Exercise
[Instructor Name]
[Date]
The client, her company and every figure are composite; the case, statutes and textbook cited are real; this is coursework, not tax advice.
The Client's Question
The client owns all the stock of an S corporation that runs a commercial print shop. Over five years she was allocated $380,000 of losses she could not deduct because her stock basis was zero. In 2025 the company's lender forgave $400,000 of debt while the company was insolvent, so the company excluded the discharge from income. She has read that the Supreme Court held that excluded discharge income passes through to S corporation shareholders and increases their basis, which would let her deduct the suspended losses. Is that still the law?
Part 1: Direct History
The citator's history entries for Gitlitz show the path of the case through the courts.
The Tax Court ruled for the Commissioner, holding that excluded discharge income of an insolvent S corporation did not increase shareholders' basis. The Tenth Circuit affirmed. The Supreme Court granted review and reversed in 2001, holding that the excluded income is an item of income that passes through to shareholders under section 1366 and increases their stock basis, so that they could deduct losses previously suspended (Gitlitz v. Commissioner, 2001).
On direct history alone, the case is a Supreme Court reversal in the taxpayer's favor, and it has never been overruled by any court.
Part 2: Treatment by Later Authority
The citator's treatment flags tell a different story. The first flag shows the holding as superseded by statute. In March 2002, Congress amended section 108(d)(7)(A) so that excluded discharge income of an S corporation is not taken into account under section 1366(a), and therefore does not pass through or increase shareholder basis, for discharges after October 11, 2001 (Income from discharge of indebtedness, 26 U.S.C. § 108, 2018). The amendment was aimed squarely at Gitlitz.
Later cases citing Gitlitz fall into two groups. Some apply it to discharges before the effective date. Others cite it only to note that the statute has since changed the result. No later case applies its holding to a post-2001 discharge.
A case can be unreversed by any court and still not be good law, because Congress can change the statute a court interpreted, and the citator's treatment flags, not its direct history, are what show that Gitlitz now governs only discharges before October 12, 2001.
Part 3: The Statute Now
Under current section 108(d)(7)(A), the exclusion is applied at the corporate level, and the excluded amount does not increase the client's stock basis. The company instead reduces its own tax attributes under section 108(b), and for an S corporation the shareholder's suspended losses are treated as the corporation's net operating loss for that purpose, so they are reduced by the excluded amount (Sawyers & Gill, 2021). The client's $380,000 of suspended losses would largely disappear rather than become deductible.
Conclusion for the Client
Gitlitz does not help her. Her 2025 discharge falls under the amended statute. The research also changes the advice: the attribute reduction will eliminate most of her suspended losses, which she should know before planning around them.
References
Gitlitz v. Commissioner, 531 U.S. 206 (2001).
Income from discharge of indebtedness, 26 U.S.C. § 108 (2018).
Sawyers, R. B., & Gill, S. L. (2021). Federal tax research (12th ed.). Cengage.
AC566 Unit 3 instructions, in plain terms
The third AC566 unit asks you to use a citator to determine whether an authority is still good law for a client. State the client's question and the authority they are relying on. Record the direct history of the case through each court, with the holding at each level. Then record its treatment by later authority, including any statute that superseded it, and how later cases have cited it. Distinguish being overruled by a court from being superseded by statute, and check the effective date of any change. Explain what the current statute provides and how it applies to the client. Close with a conclusion stated for the client, including any consequence the research reveals beyond the original question. List Gitlitz, the amended section 108 and the course's research guide as APA 7 references.
How the AC 566 Unit 3 example is put together
The sample states the client's hope: deduct $380,000 of suspended losses after a $400,000 debt discharge excluded because the company was insolvent. Part one traces Gitlitz from the Tax Court and Tenth Circuit to the Supreme Court's 2001 reversal under section 1366. Part two records the citator's superseded-by-statute flag, the March 2002 amendment effective for discharges after October 11, 2001, and later cases limited to earlier discharges. The highlighted sentence explains why direct history alone misleads. Part three applies the current statute, under which excluded income does not raise basis and suspended losses are reduced as a corporate attribute. The conclusion warns the client before she plans around those losses.
Where the points sit in the AC566 Unit 3 rubric
Citator exercises in AC566 earn points for complete direct history, accurate treatment and correct application to the client. Graders check that each court's ruling is recorded, that the distinction between overruled and superseded is explained, and that the effective date of any statutory change is checked against the client's facts. The rubric rewards carrying the finding through to the current rule and its practical effect, such as attribute reduction. Conclusions stated for the client show the research has a purpose. Exercises that stop at direct history, report a flag without explaining it, or apply a superseded holding lose substantial credit. APA 7 references to the case and statute complete the work.
AC566 Unit 3 help from the desk
Weak Unit 3 exercises report that a Supreme Court case was never overruled and conclude it still applies, missing the statute that superseded it. Others note the statutory change but not its effective date, so a pre-change transaction is analyzed under the new rule or the reverse. Later citing cases are listed without saying how they treated the holding. The current statute is mentioned but not applied, so the client learns what is not true without learning what is. If your section assigned a different case or client, a writer can trace its history and treatment and apply the current law to your facts.
Get an AC566 Unit 3 example written to your instructions
For Unit 3, name the decision or ruling to verify, any client facts and the citator your course uses, and attach your rubric. The workpaper separates history from treatment, checks each flag against the authority behind it and records the search itself. Allow 24-48h; nothing is charged for the first sample. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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AC566 Unit 3 questions, answered
Which citator does the example use?
It describes the workflow common to the major services, Shepard's, KeyCite and the tax-specific citators inside research databases, without depending on any one of them. Flags and symbols differ between services, so the example translates each into plain words. If your course requires a particular service and screenshots, the workpaper can be rebuilt around that service's display and terminology.
Where can I find a free AC566 Unit 3 sample paper?
This page holds a full AC566 Unit 3 citator exercise on Gitlitz v. Commissioner for a composite S corporation owner, with direct history, treatment, the 2002 statutory change and APA 7 references.
Is superseded by statute the same as overruled?
No. Overruled means a higher court rejected the holding. Superseded by statute means Congress changed the law the court interpreted, so the holding stops applying to later transactions even though no court has disturbed it.
What happens to the client's suspended losses now?
Under the amended statute, the excluded discharge income does not raise her basis, and her suspended losses are treated as a corporate attribute that is reduced by the excluded amount, so most of the $380,000 disappears.
What does a citator's direct history show for Gitlitz?
The Tax Court and the Tenth Circuit ruled for the Commissioner, and the Supreme Court reversed in 2001 for the taxpayer. No court has overruled that decision, which is why the treatment flags, not the history, reveal the 2002 statutory change.