- 16 - attributes occurs after the determination of the tax imposed for "the taxable year of the discharge." Because section 108(b) applies at the corporate level, we believe that the phrase "taxable year of the discharge" refers to the taxable year of the S corporation. Consequently, the S corporation reduces its tax attributes by the amount excluded from gross income pursuant to section 108(a) at the end of the corporation's taxable year. Petitioner suggests that section 108(d)(7)(B) indirectly applies the reduction in tax attributes delineated in section 108(b)(2) at the shareholder level. Thus, petitioner argues that section 108(d)(7)(A) similarly permits the passthrough of the excluded COD income. We do not agree. The language denominated in section 108(d)(7)(B) is fairly explicit. It provides, in pertinent part, that the "suspended losses" of section 1366(d) are deemed to be net operating losses. As noted, we construe section 108 as mandating the determination of an S corporation shareholder's income tax liability for the taxable year without reference to the excluded COD income. In the process, the shareholder must ascertain the amount and extent of any "suspended losses".6 Sec. 1366(d)(1). 6The losses incurred by an S corp. are passed through to the shareholders pursuant to sec. 1366(a)(1) and may be claimed by the shareholders to the extent of their adjusted bases in the corporate stock. In the event these losses exceed a shareholder's adjusted basis, the losses are "suspended" and may be carried over indefinitely pursuant to sec. 1366(d).Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Next
Last modified: May 25, 2011