Section 35-3-08-03-104 - Net Operating losses involving S corporations1. Deduction not allowed to corporation. An S corporation is not allowed a deduction for a net operating loss. The net operating loss is passed through to the shareholders subject to the following restrictions.2. Limitation on deduction for shareholders. a. The amount of the net operating loss of the S corporation for any taxable year which may be deducted by any shareholder shall not exceed the sum of: i. The adjusted basis of the shareholder's stock in the S corporation, andii. The adjusted basis of any indebtedness of the corporation to the shareholder. iii. If a shareholder's pro rata share of the corporation's net operating loss exceeds the limitation imposed, such excess is allowable as a net operating loss carryover or carryback as allowed under Section 27-7-17.b.Time for determining basis of stock and indebtedness. The adjusted basis of the stock of, or indebtedness to, a shareholder for purposes of the limitation in (a) above is determined as of the close of the taxable year of the corporation, except that i. the adjusted basis of stock which is sold or otherwise disposed of during the taxable year of the corporation is determined as of the close of the day before the day of such sale or other dispositions, andii. If the shareholder is not a shareholder as of close of the taxable year of the corporation, the adjusted basis of any indebtedness of the corporation to the shareholder is determined as of the close of the last day which he was a shareholder in such taxable year. 3. A shareholder is not allowed to deduct any loss attributable to the corporation prior to electing an S corporation status.35 Miss. Code. R. § 3-08-03-104