[§235-127]  Distributions.  (a)  Subjectto subsection (c), a distribution made by an S corporation with respect to itsstock to a resident shareholder shall be taken into account by the shareholderfor purposes of section 235-4 and shall be taxable under section 235-51 to theextent that the distribution is treated as a dividend or as gain from the saleor exchange of property pursuant to section 1368 of the Internal Revenue Code.

(b)  Subject to subsection (c), a distributionof money made by a corporation with respect to its stock to a residentshareholder during a post-termination transition period shall not be taken intoaccount by the shareholder for purposes of section 235-4 to the extent thedistribution is applied against and reduces the adjusted basis of the stock ofthe shareholder in accordance with section 1371(e) of the Internal RevenueCode.

(c)  In applying sections 1368 and 1371(e) ofthe Internal Revenue Code to any distribution referred to in subsection (a) or(b):

(1)  The term "adjusted basis of the stock"means the adjusted basis of the shareholder's stock as determined under section235-124; and

(2)  The accumulated adjustments account for thisState shall be equal to, and shall be adjusted in the same manner as, the Scorporation's accumulated adjustments account defined in section 1368(e)(1)(A)of the Internal Revenue Code, except that the account shall also be adjusted byany modifications required to be made pursuant to section 235-123(a). [L 1990,c 16, pt of §1]