4 Form 1120S. The following information was contained on GCC's Forms 1120S for 1987 and 1988, respectively: Beginning Ending Year Item Balance Balance 1987 Trade notes and accounts receivable$476,374 $ 807,551 Accumulated adjustments account (125,063) 108,699 1988 Trade notes and accounts receivable563,051 1,849,370 Accumulated adjustments account (135,801) (172,891) On Schedule E of their 1987 Federal income tax return, petitioners: (1) Claimed a $169,602 passthrough loss from ABDC, and (2) $241,424 of passthrough income from GCC. Passthrough Loss Section 1366(a) requires a taxpayer to take into account the pro rata share of income, losses, and deductions of an S corporation of which the taxpayer is a shareholder. The losses and deductions taken into account are limited as follows: Sec. 1366(d). Special Rules for Losses and Deductions.-- (1) Cannot exceed shareholder's basis in stock and debt.--The aggregate amount of losses and deductions taken into account by a shareholder under subsection (a) for any taxable year shall not exceed the sum of-- (A) the adjusted basis of the shareholder's stock in the S corporation * * *, and (B) the shareholder's adjusted basis of any indebtedness of the S corporation to the shareholder * * *.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
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