(a) Subject to subsection (c), a distribution made by an S corporation with respect to its stock to a resident shareholder shall be taken into account by the shareholder for purposes of section 235-4 and shall be taxable under section 235-51 to the extent that the distribution is treated as a dividend or as gain from the sale or exchange of property pursuant to section 1368 of the Internal Revenue Code.
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Terms Used In Hawaii Revised Statutes 235-127

  • Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
  • Internal Revenue Code: has the meaning set forth in section 235-2. See Hawaii Revised Statutes 235-121
  • Post-termination transition period: means that period defined in section 1377(b)(1) of the Internal Revenue Code. See Hawaii Revised Statutes 235-121
  • S corporation: means a corporation for which a valid election under section 1362(a) of the Internal Revenue Code is in effect. See Hawaii Revised Statutes 235-121
(b) Subject to subsection (c), a distribution of money made by a corporation with respect to its stock to a resident shareholder during a post-termination transition period shall not be taken into account by the shareholder for purposes of section 235-4 to the extent the distribution is applied against and reduces the adjusted basis of the stock of the shareholder in accordance with section 1371(e) of the Internal Revenue Code.
(c) In applying sections 1368 and 1371(e) of the 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 § 235-124; and
(2) The accumulated adjustments account for this State shall be equal to, and shall be adjusted in the same manner as, the S corporation‘s accumulated adjustments account defined in section 1368(e)(1)(A) of the Internal Revenue Code, except that the account shall also be adjusted by any modifications required to be made pursuant to section 235-123(a).
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