Shareholders of S corporations.

(1) Where a resident individual is a shareholder of an S corporation for which the election to be treated as a New York S corporation under section 660(a) of the Tax Law is in effect, or is a shareholder of an S corporation that cannot make the election provided for under section 660(a) of the Tax Law ( e.g., a foreign S corporation [ i.e., an S corporation that is not incorporated in New York State] that does not do business in New York State, or an S corporation that is taxed under article 9 of the Tax Law), and such individual determines New York taxable income by using itemized deductions, then such individual shareholder's share of any S corporation items of deduction covered by any of the provisions of sections 615(c) and (d) of the Tax Law and sections 115.2 and 115.3 of this Part, is also subject to modification. The amount of the modification should be computed by the shareholder in accordance with section 617(a) of the Tax Law. In such case, the resident individual shareholder should combine the share of each modification of an S corporation deduction with any corresponding modification applicable to such shareholder's individual Federal itemized deductions. This treatment of S corporation modifications is different from the treatment of estate and trust modifications, which are all combined into a single net figure, called the New York fiduciary adjustment, as provided in section 119.1 of this Article.