INTERNAL REVENUE CODE OF 1986

Editorial Notes

Prior Provisions

A prior section 1378, added Pub. L. 89–389, §2(a), Apr. 14, 1966, 80 Stat. 113; amended Pub. L. 91–172, title V, §511(c)(4), Dec. 30, 1969, 83 Stat. 638; Pub. L. 94–455, title XIX, §1901(a)(152), (b)(33)(R), Oct. 4, 1976, 90 Stat. 1789, 1802, related to tax imposed on certain capital gains, prior to the general revision of this subchapter by section 2 of Pub. L. 97–354.

Amendments

1986—Subsec. (a). Pub. L. 99–514, §806(b)(1), amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: "For purposes of this subtitle—

"(1) an S corporation shall not change its taxable year to any accounting period other than a permitted year, and

"(2) no corporation may make an election under section 1362(a) for any taxable year unless such taxable year is a permitted year."

Subsec. (b). Pub. L. 99–514, §806(b)(2), inserted at end "For purposes of paragraph (2), any deferral of income to shareholders shall not be treated as a business purpose."

Subsec. (c). Pub. L. 99–514, §806(b)(3), struck out subsec. (c) which required existing S corporations to use permitted year after 50-percent shift in ownership.

1984—Subsec. (c)(1). Pub. L. 98–369, §721(m), substituted "which includes December 31, 1982 (or which is an S corporation for a taxable year beginning during 1983 by reason of an election made on or before October 19, 1982)" for "which includes December 31, 1982".

Subsec. (c)(3)(B)(i). Pub. L. 98–369, §721(q), substituted "who (or whose estate) held" for "who held".

Statutory Notes and Related Subsidiaries

Effective Date of 1986 Amendment

Pub. L. 99–514, title VIII, §806(e), Oct. 22, 1986, 100 Stat. 2364, as amended by Pub. L. 100–647, title I, §1008(e)(7), (8), (10), Nov. 10, 1988, 102 Stat. 3441, provided that:

"(1) In general.—The amendments made by this section [amending this section and sections 267, 441, and 706 of this title] shall apply to taxable years beginning after December 31, 1986.

"(2) Change in accounting period.—In the case of any partnership, S corporation, or personal service corporation required by the amendments made by this section to change its accounting period for the taxpayer's first taxable year beginning after December 31, 1986—

"(A) such change shall be treated as initiated by the partnership, S corporation, or personal service corporation,

"(B) such change shall be treated as having been made with the consent of the Secretary, and

"(C) with respect to any partner or shareholder of an S corporation which is required to include the items from more than 1 taxable year of the partnership or S corporation in any 1 taxable year, income in excess of expenses of such partnership or corporation for the short taxable year required by such amendments shall be taken into account ratably in each of the first 4 taxable years beginning after December 31, 1986, unless such partner or shareholder elects to include all such income in the the [sic] partner's or shareholder's taxable year with or within which the partnership's or S corporation's short taxable year ends.

Subparagraph (C) shall apply to a shareholder of an S corporation only if such corporation was an S corporation for a taxable year beginning in 1986.

"(3) Basis, etc. rules—

"(A) Basis rule.—The adjusted basis of any partner's interest in a partnership or shareholder's stock in an S corporation shall be determined as if all of the income to be taken into account ratably in the 4 taxable years referred to in paragraph (2)(C) were included in gross income for the 1st of such taxable years.

"(B) Treatment of dispositions.—If any interest in a partnership or stock in an S corporation is disposed of before the last taxable year in the spread period, all amounts which would be included in the gross income of the partner or shareholder for subsequent taxable years in the spread period under paragraph (2)(C) and attributable to the interest or stock disposed of shall be included in gross income for the taxable year in which the disposition occurs. For purposes of the preceding sentence, the term 'spread period' means the period consisting of the 4 taxable years referred to in paragraph (2)(C)."

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–369 effective as if included in Subchapter S Revision Act of 1982, Pub. L. 97–354, see section 721(y)(1) of Pub. L. 98–369, set out as a note under section 1361 of this title.

Effective Date

Section applicable to taxable years beginning after Dec. 31, 1982, see section 6(a) of Pub. L. 97–354, set out as a note under section 1361 of this title.

Construction of Section 806 of Pub. L. 99–514

Pub. L. 100–647, title I, §1008(e)(9), Nov. 10, 1988, 102 Stat. 3441, provided that: "Nothing in section 806 of the Reform Act [Pub. L. 99–514, amending this section and sections 267, 441, and 706 of this title and enacting provisions set out above] or in any legislative history relating thereto shall be construed as requiring the Secretary of the Treasury or his delegate to permit an automatic change of a taxable year."

Regulations for I.R.C. 1378 (Return to Top)

§ 1.1378-1

Taxable year of S corporation

The Regulations cited above were determined based on programmatic database analysis using data provided by the Government Publishing Office. TouchTax attempts to hide unrelated regulation provisions. Due to limited GPO data, however, certain unrelated regulations may appear in some instances.

The preliminary Code is a preliminary release of the Internal Revenue Code of 1986 (the "Code") by the Office of the Law Revision Counsel and is subject to further revision before it is released again as a final version. The source of the preliminary Code used in TouchTax is available here: https://uscode.house.gov/download/download.shtml. The Code is a consolidation and codification by subject matter of the general and permanent laws of the U.S. prepared by the Office of the Law Revision Counsel of the U.S. House of Representatives. The Treasury Regulations are a codification of the general and permanent rules published in the Federal Register by the departments and agencies of the federal government. The version of the Treasury Regulations available within TouchTax is part of the Electronic Code of Federal Regulations which is not an official legal edition of the Code of Federal Regulations but is an editorial compilation of CFR material and Federal Register amendments produced by the National Archives and Records Administration's Office of the Federal Register (OFR) and the Government Publishing Office. The source of the CFR used in TouchTax is available here: https://www.govinfo.gov/bulkdata/ECFR/title-26. Those using TouchTax for legal research should verify their results against the printed versions of the Code and Treasury Regulations. TouchTax is copyright 2022 by Com-Lab (Mobile). Learn more at http://touchtax.edrich.de.