26 USC 1377 - Definitions and special rule

U.S Code last checked for updates: May 18, 2024

§ 1377.

Definitions and special rule

(a)

Pro rata share

For purposes of this subchapter—

(1)

In general

Except as provided in paragraph (2), each shareholder’s pro rata share of any item for any taxable year shall be the sum of the amounts determined with respect to the shareholder—

(A)

by assigning an equal portion of such item to each day of the taxable year, and

(B)

then by dividing that portion pro rata among the shares outstanding on such day.

(2)

Election to terminate year

(A)

In general

(B)

Affected shareholders

(b)

Post-termination transition period

(1)

In general

For purposes of this subchapter, the term “post-termination transition period” means—

(A)

the period beginning on the day after the last day of the corporation’s last taxable year as an S corporation and ending on the later of—

(i)

the day which is 1 year after such last day, or

(ii)

the due date for filing the return for such last year as an S corporation (including extensions),

(B)

the 120-day period beginning on the date of any determination pursuant to an audit of the taxpayer which follows the termination of the corporation’s election and which adjusts a subchapter S item of income, loss, or deduction of the corporation arising during the S period (as defined in section 1368(e)(2)), and

(C)

the 120-day period beginning on the date of a determination that the corporation’s election under section 1362(a) had terminated for a previous taxable year.

(2)

Determination defined

For purposes of paragraph (1), the term “determination” means—

(A)

a determination as defined in section 1313(a), or

(B)

an agreement between the corporation and the Secretary that the corporation failed to qualify as an S corporation.

(3)

Special rules for audit related post-termination transition periods

(A)

No application to carryovers

(B)

Limitation on application to distributions

(c)

Manner of making elections, etc.

(Added Pub. L. 97–354, § 2, Oct. 19, 1982, 96 Stat. 1685; amended Pub. L. 104–188, title I, §§ 1306–1307(b), Aug. 20, 1996, 110 Stat. 1780; Pub. L. 108–311, title IV, § 407(a), Oct. 4, 2004, 118 Stat. 1190.)

cite as: 26 USC 1377