Carryforwards and carrybacks - loss limitation

(1) Carryforwards and carrybacks to and from taxable periods of an S corporation shall be restricted in the manner provided in section 1371 (b) of the internal revenue code.

(2) The aggregate amount of losses or deductions of an S corporation taken into account by a shareholder of the S corporation for a taxable period pursuant to section 39-22-323 (2) shall not exceed such shareholder's combined adjusted basis, as determined pursuant to section 39-22-324, in the stock of the S corporation and any indebtedness of the S corporation to such shareholder.

(3) Any loss or deduction of an S corporation which is disallowed for a taxable period pursuant to subsection (2) of this section shall be treated as incurred by the corporation in the succeeding taxable period with respect to that shareholder.

(4) (a) Any loss or deduction of an S corporation which is disallowed pursuant to subsection (2) of this section for the corporation's last taxable period as an S corporation shall be treated as incurred by a shareholder on the last day of any post-termination transition period.

(b) The aggregate amount of losses and deductions taken into account by a shareholder pursuant to paragraph (a) of this subsection (4) shall not exceed such shareholder's adjusted basis in the stock of the corporation, as such adjusted basis is determined pursuant to section 39-22-324 at the close of the last day of any post-termination transition period and without regard to this subsection (4).