# Adjustments to basis of indebtedness to shareholder.
**AGENCY:**
Internal Revenue Service (IRS), Treasury.
**ACTION:**
Correcting amendment.
**SUMMARY:**
This document contains corrections to final regulations (TD 9428) that were published in the *Federal Register* on Monday, October 20, 2008 (73 FR62199) relating to the treatment of open account debt between S corporations and their shareholders. These final regulations provide rules regarding the definition of open account debt and the adjustments in basis of any indebtedness of an S corporation to a shareholder under section 1367(b)(2) of the Internal Revenue Code for shareholder advances and repayments on advances of open account debt. The regulations affect shareholders of S corporations and are necessary to provide guidance needed to comply with the applicable tax law.
**DATES:**
*Effective Date:* This correction is effective November 14, 2008, and is applicable on October 20, 2008.
**FOR FURTHER INFORMATION CONTACT:**
Stacy L. Short or Deane M. Burke, (202) 622-3070 (not a toll-free number).
**SUPPLEMENTARY INFORMATION:**
**Background**
The final regulations that are the subjects of this document are under section 1367 of the Internal Revenue Code.
**Need for Correction**
As published, final regulations (TD 9428) contain errors that may prove to be misleading and are in need of clarification.
**List of Subjects in 26 CFR Part 1**
Income taxes, Reporting and recordkeeping requirements.
**26 CFR Part 1**
**Correction of Publication**
Accordingly, 26 CFR part 1 is corrected by making the following correcting amendments:
**PART 1—INCOME TAXES**
*Paragraph 1.* The authority citation for part 1 continues to read, in part, as follows:
**Authority:**
26 U.S.C. 7805 * * *
**26 CFR Part 1**
*Par. 2.* Section 1.1367-2(e) is amended by revising the title of paragraph *Example 6.*
and the first sentence of paragraph *Example 7.* (i) to read as follows:
§ 1.1367-2
(e) * * *
*Example 6. The $25,000 aggregate principal amount applies to each shareholder.* * * *
*Example 7.* * * *
(i) The facts are the same as in *Example 6,* in addition to which, on December 31, 2009, A's basis in the open account debt is reduced under paragraph (b) of this section to $8,000. * * *
LaNita Van Dyke,
Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration).