- 16 -
Respondent determined that Thomas received $15,714 and
$15,040 of capital gain income as the result of distributions
from Southern Auto in excess of his basis during 1993 and 1994,
respectively. Thomas did not address this issue at trial, nor
did he provide any evidence that he had a basis greater than that
determined by respondent. Section 1368(a) provides that a
"distribution of property made by an S corporation with respect
to its stock to which (but for this subsection) section 301(c)
would apply shall be treated in the manner provided in subsection
(b) or (c), whichever applies." Southern Auto did not have any
accumulated earnings and profits during 1993 and 1994. Section
1368(b) provides that if such a distribution is made by an S
corporation which has no accumulated earnings and profits, the
distribution shall not be included in gross income to the extent
that it does not exceed the adjusted basis of the stock, and the
amount of the distribution which exceeds the adjusted basis of
the stock shall be treated as gain from the sale or exchange of
property. In general, the shareholder's basis in the stock of an
S corporation is increased by the shareholder's pro rata share of
the corporation's income, decreased by the shareholder's pro rata
share of the corporation's losses and deductions, and decreased
by the amount of the distributions that are not includable in
income.
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011