[§235-124]  Basis and adjustments.  (a) The initial basis of a resident shareholder in the stock of an S corporationand in any indebtedness of the corporation owed to the shareholder shall bedetermined in the manner provided under the Internal Revenue Code.  The initialbasis shall be determined as of the last to occur of the date (which may bebefore taxable years beginning after December 31, 1989) on which:

(1)  The shareholder last became a resident of thisState;

(2)  The shareholder acquired the stock or theindebtedness of the corporation; or

(3)  The corporation became an S corporation.

(b)  The initial basis of a residentshareholder in the stock and indebtedness of an S corporation shall be adjustedafter the date specified in subsection (a) in the manner and to the extentrequired by section 1011 of the Internal Revenue Code except that, with respectto any taxable period during which the shareholder was a resident of thisState:

(1)  Any modification made (other than for incomeexempt from federal or this State's taxation) pursuant to section 235-123 shallbe taken into account; and

(2)  Any adjustments made pursuant to section 1367 ofthe Internal Revenue Code for a taxable period during which this State did notmeasure S corporation shareholder income by reference to the corporation'sincome shall not be taken into account.

(c)  The initial basis of a nonresidentshareholder in the stock of an S corporation and in any indebtedness of thecorporation to the shareholder shall be zero.  The initial basis shall bedetermined as of the last to occur of the date (which may be before taxableyears beginning after December 31, 1989) on which:

(1)  The shareholder acquired the stock or theindebtedness of the corporation;

(2)  The corporation became an S corporation; or

(3)  The shareholder last became a nonresident of thisState.

(d)  The initial basis of a nonresidentshareholder in the stock and indebtedness of an S corporation shall be adjustedafter the date specified in subsection (c) in the manner provided in section1367 of the Internal Revenue Code, except that adjustments to basis shall belimited to the income attributable to the State taken into account by theshareholder pursuant to section 235-122(c).  In computing income attributableto the State for purposes of the preceding sentence, any modification made forincome exempt from federal or this State's taxation shall not be taken intoaccount.

(e)  The basis of a resident shareholder in thestock of a corporation shall be reduced by the amount allowed as a loss ordeduction pursuant to section 235-125(d).

(f)  The basis of a resident shareholder in thestock of a corporation shall be reduced by the amount of any cash distributionwhich is not taxable to the shareholder as a result of the application ofsection 235-127(b).

(g)  For purposes of this section, ashareholder shall be considered to have acquired stock or indebtedness receivedby gift at the time the donor acquired the stock or indebtedness, if the donorwas a resident of this State at the time of the gift. [L 1990, c 16, pt of §1]

 

Revision Note

 

  "Taxable years beginning after December 31, 1989"substituted for other original language.