Section 35-3-08-03-106 - Adjustments to the basis of stock of, and indebtedness owing shareholders1.Increase in basis of stock. The basis of shareholder's stock in an S corporation is increased by the amount required to be included in the gross income of such shareholder, but only to the extent to which such amount is actually included in his gross income on his income tax return, increased or decreased by any adjustment of such amount in any redetermination of the shareholder's tax liability. This increase in basis will affect only those shares of stock of the S corporation which the shareholder owned at the end of the corporation's taxable year and is apportioned in equal amounts to each share. The increase is effective as of such last day, and survives a termination of the corporation's election.2.Reduction in basis of stock. The basis of a shareholder's stock in an S corporation is reduced by an amount equal to his portion of the corporation's net operating loss for any taxable year attributable to such stock. However, the basis of such stock is not to be reduced below zero.3.Reduction in basis of indebtedness. The basis of any indebtedness of an S corporation to a shareholder is reduced by an amount equal to the shareholder's portion of the corporation's net operating loss for the taxable year, but only to the extent that such amount exceeds the basis of the shareholder's stock in the corporation. Thus, the amount of the shareholder's portion of the net operating loss is first applied in reduction of the basis of his stock in accordance with the rules of subparagraph (2) above, and only the remainder, if any, reduces the basis of the indebtedness.35 Miss. Code. R. § 3-08-03-106