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Included in the positive adjustment to stock basis is an increase for tax-exempt income realized by the S corporation.
FORBES: Tax Court Holds S Corporation Shareholders Liable for $30 Million Tax Deficiency
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The bulk of the 2010 loss was posted in December, when the performance of Fund I, which is 63% invested in private holdings, dropped by an estimated 26.9%, suggesting a significant mark-to-market adjustment while the stock market was zooming higher.
FORBES: New Jersey Hedge Fund Posts Its First Down Year In A Decade
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The tactics of Yorkville Advisors have been the subject of several Forbes articles, which noted that one Yorkville fund, YA Global Investment Fund I, never had a down month from February 2001 to July 2008 until a stunning reversal saw it report a drop of 33% in 2010, most of it in the single month of December 2010, suggesting a big mark-to-market adjustment while the stock market was rising.
FORBES: SEC Charges Formerly $1 Billion Yorkville Advisors Hedge Fund With Fraud and Bogus Valuations
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The adjustment took into account stock-based compensation expense, as well as other items.
FORBES: Magazine Article
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Making matters worse, a taxpayer may need to compute his adjustment even in the event that the sale of stock or a partnership interest generates a loss.
FORBES: The Elf On A Shelf Will Haunt Your Kid's Dreams, And More Thoughts On The Obamacare Investment Tax
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Firms increased their stock levels after having run them down in the previous quarter: the adjustment added 1.3 percentage points to GDP growth.
ECONOMIST: Overview
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The new pricing structure, in and of itself, created much backlash among customers, but the rationale for investing in the stock was that it would create a one-to-two quarter adjustment and improve the business model.
FORBES: NetFlix: Once Bitten, Twice Shy