§ 105-134.7. Transitional adjustments. - North Carolina Statutes

§ 105‑134.7. Transitional adjustments.

(a)        The followingadjustments to taxable income shall be made in calculating North Carolinataxable income:

(1)        Amounts that wereincluded in the basis of property under federal tax law but not under State taxlaw before January 1, 1989, shall be added to taxable income in the year thetaxpayer disposes of the property.

(2)        Amounts that wereincluded in the basis of property under State tax law but not under federal taxlaw before January 1, 1989, shall be deducted from taxable income in the yearthe taxpayer disposes of the property.

(3)        Amounts that wererecognized as income under federal law but not under State law due to ataxpayer's use of the installment method set out in G.S. 105‑142(f) priorto January 1, 1989, shall be added to taxable income in the taxpayer's firsttaxable year beginning on or after January 1, 1989. Amounts that wererecognized as income under State law but not under federal law due to ataxpayer's use of a different installment method prior to January 1, 1989,shall be deducted from taxable income in the taxpayer's first taxable yearbeginning on or after January 1, 1989.

(4)        Losses in the natureof net economic losses sustained in any or all of the five taxable yearspreceding the taxpayer's first taxable year beginning on or after January 1,1989, arising from business transactions, business capital, or businessproperty, may be deducted from taxable income subject to the limitationscontained in former G.S. 105‑147(9)a., c., and d. (repealed).

(5)        If the taxpayer hasa net operating loss for a taxable year beginning on or after January 1, 1989,that part of the loss that is carried back to and deducted in a taxable yearbeginning before January 1, 1989, pursuant to section 172 of the Code may bededucted from taxable income in the taxable year following the taxable year forwhich the loss occurred.

(6)        A loss or deductionthat was incurred or paid and deducted from State taxable income in a taxableyear beginning before January 1, 1989, and is carried forward and deducted in ataxable year beginning on or after January 1, 1989, under the Code shall beadded to taxable income.

(7)        The transitionaladjustments provided in Part 1A of this Article shall be made with respect to ashareholder's pro rata share of S Corporation income.

(b)        The Secretary mayby rule require other adjustments to be made to taxable income as necessary toassure that the transition to the tax changes effective January 1, 1989, willnot result in double taxation of income, exemption of otherwise taxable incomefrom taxation under this Division, or double allowance of deductions. (1989,c. 728, s. 1.4; 1993, c. 485, s. 10; 1998‑98, s. 91.)