Page:United States Statutes at Large Volume 96 Part 2.djvu/316

 96 STAT. 1678

PUBLIC LAW 97-354—OCT. 19, 1982

"(c) GROSS INCOME OF A SHAREHOLDER.—In any case where it is necessary to determine the gross income of a shareholder for purposes of this title, such gross income shall include the shareholder's pro rata share of the gross income of the corporation. "(d) SPECIAL RULES FOR LOSSES AND DEDUCTIONS.— "(1) CANNOT EXCEED SHAREHOLDER'S BASIS IN STOCK AND

DEBT.—The aggregate amount of losses and deductions taken into account by a shareholder under subsection (a) for any taxable year shall not exceed the sum of— "(A) the adjusted basis of the shareholder's stock in the S corporation (determined with regard to paragraph (1) of section 1367(a) for the taxable year), and "(B) the shareholder's adjusted basis of any indebtedness of the S corporation to the shareholder (determined without regard to any adjustment under paragraph (2) of section 1367(b) for the taxable year). "(2) INDEFINITE CARRYOVER OF DISALLOWED LOSSES AND DEDUC-

TIONS.—Any loss or deduction which is disallowed for any taxable year by reason of paragraph (1) shall be treated as incurred by the corporation in the succeeding taxable year with respect to that shareholder. "(3) CARRYOVER OF DISALLOWED LOSSES AND DEDUCTIONS TO POST-TERMINATION TRANSITION PERIOD.—

"(A) IN GENERAL.—If for the last taxable year of a corporation for which it was an S corporation a loss or deduction was disallowed by reason of paragraph (1), such loss or deduction shall be treated as incurred by the shareholder on the last day of any post-termination transition period. "(B) CANNOT EXCEED SHAREHOLDER'S BASIS IN STOCK.—The

aggregate amount of losses and deductions taken into account by a shareholder under subparagraph (A) shall not exceed the adjusted basis of the shareholder's stock in the corporation (determined at the close of the last day of the post-termination transition period and without regard to this paragraph). "(C) ADJUSTMENT IN BASIS OF STOCK.—The shareholder's

basis in the stock of the corporation shall be reduced by the amount allowed as a deduction by reason of this paragraph. "(e) TREATMENT OF FAMILY GROUP.—If an individual who is a member of the family (within the meaning of section 704(e)(3)) of one or more shareholders of an S corporation renders services for the corporation or furnishes capital to the corporation without receiving reasonable compensation therefor, the Secretary shall make such adjustments in the items taken into account by such individual and such shareholders as may be necessary in order to reflect the value of such services or capital. "(f) SPECIAL RULES.— "(1) SUBSECTION (a) NOT TO APPLY TO CREDIT ALLOWABLE UNDER SECTION 39.—Subsection (a) shall not apply with respect

to any credit allowable under section 39 (relating to certain uses of gasoline, special fuels, and lubricating oil). "(2) REDUCTION IN PASS-THRU FOR TAX IMPOSED ON CAPITAL

Post, p. 1683.

GAIN.—If any tax is imposed under section 56 or 1374 for any taxable year on an S corporation, for purposes of subsection (a)-

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