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necessarily taxable. A loan by a corporation to a stockholder or
by a trust to a beneficiary is generally not taxable unless
forgiven. Generally, only distributions to stockholders by a C
corporation out of its earnings and profits are taxable. See
secs. 301, 316(a). Nor does the stockholder of an S corporation
necessarily have taxable income attributable to distributions
received from and/or the operations of that corporation. That is
because of the different and, at times, complex rules in sub-
chapter S of the Code. Generally, an S corporation is not
subject to tax, see sec. 1363(a), but each stockholder of an S
corporation must take into account in such stockholder's income
tax return for the year in which the taxable year of the S
corporation ends, inter alia, such stockholder's pro rata share
of that S corporation's items of income, loss, and deduction, see
sec. 1366(a)(1)(A). Moreover, a distribution of property by an S
corporation to a stockholder is not necessarily taxable. See
sec. 1368. Finally, a distribution to a beneficiary from a trust
subject to subchapter J of the Code is not necessarily taxable to
that beneficiary. That is because of the different and, at
times, complex rules in subchapter J of the Code. For example, a
29(...continued)
for its purchase of the Illinois land in February 1988 in respect
of which it borrowed $50,000 from the Champaign National Bank,
Trust 768 conducted no activities during the years at issue
except for maintaining an account at that bank. We assume for
discussion purposes that it was subject to subchapter J of the
Code.
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