S Corp s/h loan discharge via bankruptcy

Technical topics regarding tax preparation.
#1
SF CPA  
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Hey Pros,

I inherited a new (to me) S Corp client this year that had a s/h loan of ~$500k discharged by a bankruptcy court. Ordinarily, s/h loans that are discharged are done via being contributed to capital and are a non-issue since, per IRC Secs 108(e)(6) and 108(d)(7)(C), there is no COD recognition. However, in this particular case, the loan was discharged by a bankruptcy court. Is there any way I can still use the above code sections and treat it as contribution to capital anyway? Does the court discharge prevent the contribution to capital of the loan?

Thanks in advance!
 

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