- 11 - is increased for his or her share of the pass-through amounts. See sec. 1367(a)(1).10 Consequently, we assume that Briggs’ and Mrs. Morris’ adjusted bases in their stock included their pro rata shares of Towers Construction’s gas rebate earnings. To that extent, the distributions of the gas rebate payments would give rise to no additional gross income apart from the pass- through amounts. Because petitioners have not shown and the record does not otherwise establish any additional amounts of adjusted basis in their Towers Construction stock, distributions in excess of the pass-through amounts represent additional gross income to Briggs and Mrs. Morris, which generally would be treated as gains from the sale or exchange of property.11 See sec. 1368(b)(2). Without further refinement, this analysis would result in Briggs and the Morrises having, for each taxable year in issue, combined redetermined gross income from the gas rebate payments 10 An amount that is required to be included in the S corporation’s gross income on the shareholder’s tax return is taken into account under these basis-adjustment rules only to the extent “included in the shareholder’s gross income on his return, increased or decreased by any adjustment of such amount in a redetermination of the shareholder’s tax liability.” Sec. 1367(b)(1). Since we herein redetermine petitioners’ gross incomes to include shares of Tower Construction’s gas rebate income, their adjusted bases would be increased accordingly. 11 For taxable years 1986 and 1988, this potential problem affects only Briggs, to the extent he received more than half of the rebates. For taxable year 1987, this potential problem affects only Mrs. Morris, to the extent the Morrises received more than half of the rebates.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011