(petitioners, married couple, filed joint return for 2003; petitioners held partial ownership in S corporation and claimed $279,289 loss as pro-rata share of S corporation's loss; IRS allowed loss to extent of petitioners' basis in S corporation - $153,282.93; issue was whether petitioners’ basis in S corporation reduced by suspended losses in the first year that the basis is adequate to absorb the losses; petitioners, in 1997, did not claim deduction for suspended loss even though, in 1997, they had sufficient basis to absorb the loss, and hence, petitioners claim, there was no basis reduction at that time; court disagreed with petitioners because I.R.C. Sec. 1367 requires basis reduction to occur in first tax year when there is sufficient basis to absorb a loss, and basis is still reduced even if shareholder fails to take deduction for loss; language in I.R.C. Sec. 1367(b)(1) providing that basis is increased by corporate income only to extent of inclusion in shareholder's income bolster's position of IRS because no comparable exception for corporate losses provided; substantial understatement penalty upheld).