- 9 -
Wedgewood suffered the $1,759,987 loss. We must determine both
his basis and whether Wedgewood suffered any loss.6
Petitioner bears the burden of proof. See Rule 142(a).
II. Petitioner’s Basis With Respect to Wedgewood
A. Principal Statutory Provisions
Section 1366(a)(1) provides that a shareholder of an
S corporation shall take into account his pro rata share of the S
corporation’s items of income, loss, deduction, or credit for the
S corporation’s taxable year ending in the shareholder’s taxable
year. Section 1366(d), however, imposes a limit on the amount of
such losses and deductions (without distinction, losses) that a
shareholder may take into account for any taxable year. He may
not take into account an aggregate amount of such losses
exceeding the sum of (1) his adjusted basis in the stock of the S
corporation and (2) his adjusted basis in any indebtedness of the
S corporation to the shareholder (collectively, his S corporation
investment). See sec. 1366(d)(1). Any losses so disallowed may
be carried forward indefinitely. See sec. 1366(d)(2).
6 In the statutory notice of deficiency, respondent sets
forth numerous grounds for disallowing the $1,759,987 loss. On
brief, respondent’s principal argument (other than that
petitioner lacks sufficient adjusted basis in his investment in
Wedgewood) is that petitioner has failed to show that Wedgewood
realized any loss. We assume that respondent has conceded any
other grounds.
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