Character of S corporation items

(a) In order that the modifications described in § 12-715(a)-2 of this Part, and the passive activity loss and capital loss limitations described in § 12-711(b)-6 of Part II, may be properly applied to S corporation items of income or loss, each of such S corporation items shall have the same character for a shareholder for Connecticut income tax purposes as for federal income tax purposes. Where an item is not characterized for federal income tax purposes, the item shall have the same character for a shareholder as if realized directly from the source from which realized by the S corporation or incurred in the same manner as incurred by the S corporation. If an S corporation item is not required to be taken into account for federal income tax purposes (such as interest on bonds of another state), the character of the item for a shareholder for Connecticut income tax purposes is the same as if the shareholder, as an individual, had realized or incurred the item directly.

(b) While this section pertains to Section 12-715(b) of the general statutes, for purposes of supplementary interpretation, as the phrase is used in Section 12-2 of the general statutes, the adoption of this section is authorized by Section 12-740(a) of the general statutes.

(Effective November 18, 1994)

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