North Carolina General Statutes 105-131.6. Distributions
(a) Subject to the provisions of subsection (c) of this section, a distribution made by an S Corporation with respect to its stock to a resident shareholder is taxable to the shareholder as provided in Parts 2 and 3 of this Article to the extent that the distribution is characterized as a dividend or as gain from the sale or exchange of property pursuant to section 1368 of the Code.
(b) Subject to the provisions of subsection (c) of this section, any distribution of money made by a corporation with respect to its stock to a resident shareholder during a post-termination transition period is not taxable to the shareholder as provided in Parts 2 and 3 of this Article 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 Code.
(c) In applying sections 1368 and 1371(e) of the Code to any distribution referred to in this section:
(1) The term “adjusted basis of the stock” means the adjusted basis of the shareholder’s stock as determined under N.C. Gen. Stat. § 105-131.3
Terms Used In North Carolina General Statutes 105-131.6
- 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.
- property: shall include all property, both real and personal. See North Carolina General Statutes 12-3
- state: when applied to the different parts of the United States, shall be construed to extend to and include the District of Columbia and the several territories, so called; and the words "United States" shall be construed to include the said district and territories and all dependencies. See North Carolina General Statutes 12-3
(2) The accumulated adjustments account maintained for each resident shareholder must be equal to, and adjusted in the same manner as, the corporation’s accumulated adjustments account defined in section 1368(e)(1)(A) of the Code, except that:
a. The accumulated adjustments account shall be modified in the manner provided in N.C. Gen. Stat. § 105-131.3(b)(1).
b. The amount of the corporation’s federal accumulated adjustments account that existed on the day this State began to measure the S Corporation shareholders’ income by reference to the income of the S Corporation is ignored and is treated for purposes of this Article as additional accumulated earnings and profits of the corporation. (1987 (Reg. Sess., 1988), c. 1089, s. 1; 1989, c. 728, ss. 1.33, 1.35; 1998-98, s. 6.)