(1) Increases in basis The basis of each shareholders stock in an S corporation shall be increased for any period by the sum of the following items determined with respect to that shareholder for such period:
(A) the items of income described in subparagraph (A) of section
1366 (a)(1),
(B) any nonseparately computed income determined under subparagraph (B) of section
1366 (a)(1), and
(C) the excess of the deductions for depletion over the basis of the property subject to depletion.
(2) Decreases in basis The basis of each shareholders stock in an S corporation shall be decreased for any period (but not below zero) by the sum of the following items determined with respect to the shareholder for such period:
(A) distributions by the corporation which were not includible in the income of the shareholder by reason of section
1368,
(B) the items of loss and deduction described in subparagraph (A) of section
1366 (a)(1),
(C) any nonseparately computed loss determined under subparagraph (B) of section
1366 (a)(1),
(D) any expense of the corporation not deductible in computing its taxable income and not properly chargeable to capital account, and
(E) the amount of the shareholders deduction for depletion for any oil and gas property held by the S corporation to the extent such deduction does not exceed the proportionate share of the adjusted basis of such property allocated to such shareholder under section
613A (c)(11)(B).
The decrease under subparagraph (B) by reason of a charitable contribution (as defined in section 170(c)) of property shall be the amount equal to the shareholders pro rata share of the adjusted basis of such property. The preceding sentence shall not apply to contributions made in taxable years beginning after December 31, 2007.