§ 105-131.3. Basis and adjustments. - North Carolina Statutes

§105‑131.3.  Basis and adjustments.

(a)        The initial basisof a resident shareholder in the stock of an S Corporation and in anyindebtedness of the corporation owed to that shareholder shall be determined,as of the later of the date the stock is acquired, the effective date of the SCorporation election, or the date the shareholder became a resident of thisState, as provided under the Code.

(b)        The basis of aresident shareholder in the stock and indebtedness of an S Corporation shall beadjusted in the manner and to the extent required by section 1011 of the Codeexcept that:

(1)        Any adjustments made(other than for income exempt from federal or State income taxes) pursuant toG.S. 105‑131.2 shall be taken into account; and

(2)        Any adjustments madepursuant to section 1367 of the Code for a taxable period during which thisState did not measure S Corporation shareholder income by reference to thecorporation's income shall be disregarded.

(c)        The initial basisof a nonresident shareholder in the stock of an S Corporation and in anyindebtedness of the corporation to that shareholder shall be zero.

(d)        The basis of anonresident shareholder in the stock and indebtedness of an S Corporation shallbe adjusted as provided in section 1367 of the Code, except that adjustments tobasis shall be limited to the income taken into account by the shareholderpursuant to G.S. 105‑131.1(b).

(e)        The basis of ashareholder in the stock of an S Corporation shall be reduced by the amountallowed as a loss or deduction pursuant to G.S. 105‑131.4(c).

(f)         The basis of aresident shareholder in the stock of an S Corporation shall be reduced by theamount of any cash distribution that is not taxable to the shareholder as aresult of the application of G.S. 105‑131.6(b).

(g)        For purposes ofthis section, a shareholder shall be considered to have acquired stock orindebtedness received by gift at the time the donor acquired the stock orindebtedness, if the donor was a resident of this State at the time of thegift. (1987 (Reg. Sess., 1988), c. 1089, s. 1; 1989, c. 728,ss. 1.33, 1.35.)