California FTB Issues Guidance on S Corporation Shareholder Basis Calculation When Some Years Closed

The California Franchise Tax Board (FTB) Jan. 6 issued a technical advice memorandum on calculating shareholder basis in an S corporation when some years are closed by the statute of limitations, for individual income tax purposes. Taxpayer requested guidance on whether previous IRS guidance applied under state tax law when, in a year closed by the statute of limitations, an S corporation shareholder: 1) improperly claimed losses in excess of stock and debt basis; and 2) improperly failed to recognize income from a distribution in excess of stock basis. The FTB advised that the IRS guidance controlled the first situation ...