- 4 -
forward.3 In 1994, petitioners used an NOL carryover of $154,971.4
In the notice of deficiency, respondent determined that the
use of Narwhal’s excluded COD income to increase the basis of
petitioner’s stock was improper and consequently there was
insufficient basis for petitioners to use the NOL carryovers.
Respondent made other adjustments to petitioners’ 1994 return based
on the disallowance of the NOL’s. The parties agree that these
adjustments are computational and turn on our resolution of the NOL
issue.
Discussion
Section 1366(d) provides that the aggregate amount of losses
and deductions taken into account by a shareholder of an S
corporation cannot exceed the sum of: (1) The adjusted basis of
the shareholder’s stock in the S corporation; and (2) the
shareholder’s adjusted basis of any indebtedness of the S
corporation to the shareholder. Petitioners maintain that they are
entitled to increase the basis in their Narwhal stock by their
distributive share of COD income and accordingly should be allowed
to deduct certain NOL’s.
Petitioners make no attempt to distinguish their case from
3 Petitioners carried back a total of $85,654 in
suspended losses to 1990, 1991, and 1992. The remaining $991,995
was then carried forward.
4 Petitioners claimed a $164,197 NOL carryover on their
amended 1994 return. We are unable to account for this
discrepancy.
Page: Previous 1 2 3 4 5 Next
Last modified: May 25, 2011