Thomas E. Hogan, III and Sheila M. Hogan - Page 4




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          1991, requesting that the claimed overpayment be applied to their            
          1992 estimated tax liability.                                                
               Petitioners filed their 1992 joint Federal income tax return            
          on April 17, 1996.  Petitioners claimed an overpayment in the                
          amount of $5,103.2  Petitioners requested that the overpayment be            
          applied to their 1993 estimated tax liability.  On April 17,                 
          1996, respondent applied $2,955, the portion of the claimed                  
          overpayment relating to petitioner's 1992 wage withholdings, to              
          petitioner's outstanding section 6672 liability.                             
                                      Discussion                                       
          EBS Losses                                                                   
               Generally, shareholders of a subchapter S corporation are               
          entitled, inter alia, to deduct their pro rata share of the                  
          corporation's losses.  See sec. 1366(a).  The losses may be                  
          carried over to subsequent years under section 1366(d)(2).  The              
          amount of losses claimed by a shareholder cannot, however, exceed            
          the amount of the adjusted bases in the shareholder's stock and              
          in any indebtedness of the corporation to the shareholder.  See              
          sec. 1366(d)(1).                                                             
               A taxpayer's adjusted bases in stock and debt are determined            
          under section 1367.  Relevant here, section 1367(a)(2)(B)                    
          provides that a taxpayer's basis in stock shall be reduced by                

          2    This amount, $5,103, consisted of $2,955 from petitioner's              
          1992 wage withholdings and the amount of overpayment claimed by              
          petitioners for 1991 of $2,148.                                              





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