GENERAL ASSEMBLY OF NORTH CAROLINA
1991 SESSION
CHAPTER 752
AN ACT TO CLARIFY SUBCHAPTER S CORPORATION LOSS CARRYFORWARDS.
The General Assembly of North Carolina enacts:
Section 1. G.S. 105-131.4(e) reads as rewritten:
"(e) Each shareholder's
pro rata share of the reduction of an S Corporation's income because of the
allowance of a carryforward loss to the S Corporation under this subsection
shall be taken into account by the shareholder as a transitional adjustment under
G.S. 105-134.7. Notwithstanding the provisions of subsection (a) of this
section, an S Corporation that sustained a net economic loss in a taxable year
beginning before January 1, 1989, may carry the loss forward to a taxable year
beginning on or after January 1, 1989, and before July 1, 1991, and may deduct
the loss in that each year to one-half of the extent it could
have carried forward and deducted the loss pursuant to G.S. 105-130.5(b)(4) and
G.S. 105-130.8 if the S Corporation Income Tax Act had not become effective
until taxable years beginning on or after July 1, 1991. Any loss
carryforward allowed as a deduction by this subsection may not exceed one-half
of the S Corporation's net income, as defined in the Code subject to the
adjustments provided in G.S. 105-130.5 other than the adjustment provided in
G.S. 105-130.5(b)(4), and is subject to the limitations provided in G.S.
105-131.4(b) and (d). Notwithstanding the provisions of G.S.
105-130.8(4), a net economic loss carried forward to a 1990 or 1991 taxable
year pursuant to this subsection is not applied to or offset by that part of
the net income of a preceding tax year from which the loss was not deductible
solely due to the 'one-half' limitations provided in this subsection. Notwithstanding
the provisions of G.S. 105-131.3, the basis of a shareholder in the stock of an
S Corporation shall be adjusted for the shareholder's pro rata share of the
carryforward loss allowed as a deduction to the S Corporation under this
subsection. Notwithstanding the provisions of G.S. 105-131.6(c)(2), the
accumulated adjustments account maintained for each resident shareholder shall
be adjusted for the shareholder's pro rata share of the carryforward loss
allowed as a deduction to the S Corporation under this subsection."
Sec. 2. This act is effective retroactively for taxable years beginning on or after January 1, 1989, and expires for taxable years beginning on or after July 1, 1991.
In the General Assembly read three times and ratified this the 16th day of July, 1991.
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James C. Gardner
President of the Senate
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Daniel Blue, Jr.
Speaker of the House of Representatives