Section 235-123 - Modification and characterization of income(a) The pro rata share of each resident and nonresident shareholder in the income attributable to the State of an S corporation, for the purposes of section 235-122(c), shall be subject to the modifications to corporate income provided by this chapter.(b) The pro rata share of each resident shareholder in the income not attributable to the State of an S corporation, for the purposes of section 235-122(c), shall be subject to the modifications to individual income provided by this chapter.(c) S corporation items taken into account by a shareholder pursuant to section 235-122(c) shall be characterized as though received or incurred by the corporation and not its shareholder.