- 6 -
Section 1366(a) provides, generally, that income, losses,
deductions, and credits are passed through pro rata to
shareholders on their individual income tax returns. Secs.
1363(a), 1366(a). Section 1366(b) provides that the character of
each item of income is determined as if it were realized directly
from the source from which the corporation realized it, or
incurred in the same manner as the corporation. A shareholder's
gross income includes a pro rata share of the subchapter S
corporation's gross income. Sec. 1366(c). The shareholder’s
basis, once computed, limits the amount of losses and deductions
that may be taken into account by a shareholder for the taxable
year. Sec. 1366(d). Any losses and deduction that the
shareholder is not entitled to deduct currently are carried
forward indefinitely (suspended losses). Id.
Section 1367(a)(1) limits the items by which the shareholder
may increase his basis in the stock of an S corporation to the
following items, inter alia:
(A) the items of income described in subparagraph (A)
of section 1366(a)(1), [and]
(B) any nonseparately computed income determined under
subparagraph (B) of section 1366(a)(1) * * *
Section 1367(b)(1) provides that an item "required to be included
in the gross income of a shareholder and shown on his return" is
taken into account under section 1367(a)(1)(A) only to the extent
included in gross income on the shareholder's return, increased
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