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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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