-32-
respondent determined that petitioner's basis in his stock was
consumed by prior year distributions, and that Development was
not indebted to petitioner. (See supra Issue 1 for our holding
on the prior year's distributions.)
Petitioner asserts that in 1989 he assumed Development's
indebtedness to Carlsgate and the Carl E. Jones Trust No. 1 in
the amounts of $82,132 and $153,847, respectively, and that in
1990 he assumed Development's indebtedness to INI in the amount
of $417,978. Petitioner contends that his assumption of
Development's indebtedness provided him a basis for taking the
losses, but that he had sufficient basis in his stock to deduct
the losses without considering his basis in any indebtedness of
Development to him.21
A shareholder in an S corporation is required to decrease
the basis in his S corporation stock (but not below zero) by,
among other items, the shareholder's pro rata share of the S
corporation's losses and deductions. Sec. 1367(a)(2)(B) and (C).
Section 1368(d) provides that the adjustments to the
shareholder's basis in his stock required by subsections (b) and
21
Whether petitioner had sufficient basis in his stock in 1990
and 1991 to deduct the losses, without considering his basis in
Development's indebtedness to him, is a question of fact. The
record in this case is not sufficient for this Court to compute
the basis petitioner had in his Development stock in 1990 and
1991. That basis must be ascertained by the parties in the Rule
155 computation. Thus, we limit our finding on this issue to
whether petitioner had a basis in Development's indebtedness to
him.
Page: Previous 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 NextLast modified: May 25, 2011