(2) Each item of shareholder income, gain, loss or deduction has the same character for a shareholder under this chapter and ORS chapter 316 as it has for federal income tax purposes. If an item is not characterized for federal income tax purposes, it has the same character for a shareholder as if realized directly from the source from which realized by the S corporation or incurred in the same manner as incurred by the S corporation.
(3) In any case where it is necessary to determine the gross income of a shareholder for purposes of ORS chapter 316, such gross income shall include the shareholder’s pro rata share of the gross income of the S corporation.
(4) If any tax is imposed under ORS 314.766 for any taxable year on an S corporation, for purposes of subsection (1) of this section, the amount of each recognized built-in gain for such taxable year shall be reduced by its proportionate share of such tax.
(5) If any tax is imposed under ORS 314.767 on an S corporation, for purposes of subsection (1) of this section, each item of passive investment income shall be reduced by an amount which bears the same ratio to the amount of such tax as the amount of such item bears to the total passive investment income for the taxable year. [Formerly 314.734]
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