Proof.
The implication (1) \Rightarrow (2) is immediate. Assume (2). First assume that M is annihilated by I. In this case, M is an R/I-module. Hence, we have an isomorphism
M \otimes _ R S = M \otimes _{R/I} S/IS = M \otimes _{R/I} R/I = M
proving the claim. Next we prove by induction that M \to M \otimes _ R S is an isomorphism for any module M is annihilated by I^ n. Assume the induction hypothesis holds for n and assume M is annihilated by I^{n + 1}. Then we have a short exact sequence
0 \to I^ nM \to M \to M/I^ nM \to 0
and as R \to S is flat this gives rise to a short exact sequence
0 \to I^ nM \otimes _ R S \to M \otimes _ R S \to M/I^ nM \otimes _ R S \to 0
Using that the canonical map is an isomorphism for M' = I^ nM and M'' = M/I^ nM (by induction hypothesis) we conclude the same thing is true for M. Finally, suppose that M is a general I-power torsion module. Then M = \bigcup M_ n where M_ n is annihilated by I^ n and we conclude using that tensor products commute with colimits.
\square
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