TRANSFER OF SUSPENDED LOSSES INCIDENT TO DIVORCE, ETC.

SEC. 235. TRANSFER OF SUSPENDED LOSSES INCIDENT TO DIVORCE, ETC.(a) In General.—Section 1366(d)(2) (relating to indefinite carryover of disallowed losses and deductions) is amended to read as follows:“(2) Indefinite carryover of disallowed losses and deductions.—“(A) In general.—Except as provided in subparagraph (B), any loss or deduction which is disallowed for any taxable year by reason of paragraph (1) shall be treated as incurred by the corporation in the succeeding taxable year with respect to that shareholder.“(B) Transfers of stock between spouses or incident to divorce.—In the case of any transfer described in section 1041(a) of stock of an S corporation, any loss or deduction described in subparagraph (A) with respect such stock shall be treated as incurred by the corporation in the succeeding taxable year with respect to the transferee.”.(b) Effective Date.—The amendment made by this section shall apply to taxable years beginning after December 31, 2004.