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Court deemed respondent to have conceded any grounds for
disallowance of the deductions claimed for SPS losses other than
the limitation of the deductions to the extent of petitioner’s
stock and loan bases in SPS.
ULTIMATE FINDINGS OF FACT
The combined total of the adjusted bases of petitioner’s
stock in WIS and of WIS’s indebtedness to petitioner was $32,846
for 1991, before taking account of pass-through losses for the
year, and zero for 1992. The adjusted basis of petitioner’s
stock in SPS was $31,526 for 1992, before taking account of pass-
through losses for the year, and zero for 1993. Petitioner
recognized additional income in the business reincorporation
transaction in the amount of $30,647 for 1992.
OPINION
1. Petitioner’s Basis in WIS
In general an S corporation is not subject to Federal income
tax. Sec. 1363(a). The S corporation’s items of income, loss,
deduction, and credit for the taxable year are taken into account
currently by the shareholders on their individual returns. Sec.
1366(a). The aggregate amount of corporate losses and deductions
taken into account by a shareholder cannot exceed the sum of the
adjusted bases of the shareholder’s stock in the S corporation
and the indebtedness of the S corporation to the shareholder.
Sec. 1366(d)(1).
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