26 CFR 1.444-1T - Election to use a taxable year other than the required taxable year (temporary).

§ 1.444-1T Election to use a taxable year other than the required taxable year (temporary).

(a)General rules -

(1)Year other than required year. Except as otherwise provided in this section and § 1.444-2T, a partnership, S corporation, or personal service corporation (as defined in § 1.441-3(c)) may make or continue an election (a “section 444 election”) to have a taxable year other than its required taxable year. See paragraph (b) of this section for limitations on the taxable year that may be elected. See § 1.444-2T for rules that generally prohibit a partnership, S corporation, or personal service corporation that is a member of a tiered structure from making or continuing a section 444 election. See § 1.444-3T for rules explaining how and when to make a section 444 election.

(2)Effect of section 444 election -

(i)In general. A partnership or S corporation that makes or continues a section 444 election shall file returns and make payments as required by §§ 1.7519-1T and 1.7519-2T. A personal service corporation that makes or continues a section 444 election is subject to the deduction limitation of § 1.280H-1T.

(ii)Duration of section 444 election. A section 444 election shall remain in effect until the election is terminated pursuant to paragraph (a)(5) of this section.

(3)Section 444 election not required for certain years. A partnership, S corporation, or personal service corporation is not required to make a section 444 election to use -

(i) A taxable year for which such entity establishes a business purpose to the satisfaction of the Commissioner (i.e., approved under section 4 or 6 of Rev. Proc. 87-32, 1987-28 I.R.B. 14, or any successor revenue ruling or revenue procedure), or

(ii) A taxable year that is a “grandfathered fiscal year,” within the meaning of section 5.01(2) of Rev. Proc. 87-32 or any successor revenue ruling or revenue procedure.

Although a partnership, S corporation or personal service corporation qualifies to use a taxable year described in paragraph (a)(3) (i) or (ii) of this section, such entity may, if otherwise qualified, make a section 444 election to use a different taxable year. Thus, for example, assume that a personal service corporation that historically used a January 31 taxable year established to the satisfaction of the Commissioner, under section 6 of Rev. Proc. 87-32, a business purpose to use a September 30 taxable year for its taxable year beginning February 1, 1987. Pursuant to this paragraph (a)(3), such personal service corporation may use a September 30 taxable year without making a section 444 election. However, the corporation may, if otherwise qualified, make a section 444 election to use a year ending other than September 30 for its taxable year beginning February 1, 1987.

(4)Required taxable year. For purposes of this section, the term “required taxable year” means the taxable year determined under section 706(b), 1378, or 441(i) without taking into account any taxable year which is allowable either -

(i) By reason of business purpose (i.e., approved under section 4 or 6 of Rev. Proc. 87-32 or any successor revenue ruling or procedure), or

(ii) As a “grandfathered fiscal year” within the meaning of section 5.01(2) of Rev. Proc. 87-32, or any successor revenue ruling or procedure.

(5)Termination of section 444 election -

(i)In general. A section 444 election is terminated when -

(A) A partnership, S corporation, or personal service corporation changes to its required taxable year; or

(B) A partnership, S corporation, or personal service corporation liquidates (including a deemed liquidation of a partnership under § 1.708-1 (b)(1)(iv)); or

(C) A partnership, S corporation, or personal service corporation willfully fails to comply with the requirements of section 7519 or 280H, whichever is applicable; or

(D) A partnership, S corporation, or personal service corporation becomes a member of a tiered structure (within the meaning of § 1.444-2T), unless it is a partnership or S corporation that meets the same taxable year exception under § 1.444-2T (e); or

(E) An S corporation's S election is terminated; or

(F) A personal service corporation ceases to be a personal service corporation.

However, if a personal service corporation, that has a section 444 election in effect, elects to be an S corporation, the S corporation may continue the section 444 election of the personal service corporation. Similarly, if an S corporation that has a section 444 election in effect terminates its S election and immediately becomes a personal service corporation, the personal service corporation may continue the section 444 election of the S corporation. If a section 444 election is terminated under this paragraph (a)(5), the partnership, S corporation, or personal service corporation may not make another section 444 election for any taxable year.

(ii)Effective date of termination. A termination of a section 444 election shall be effective -

(A) In the case of a change to the required year, on the first day of the short year caused by the change;

(B) In the case of a liquidating entity, on the date the liquidation is completed for tax purposes;

(C) In the case of willful failure to comply, on the first day of the taxable year (determined as if a section 444 election had never been made) determined in the discretion of the District Director;

(D) In the case of membership in a tiered structure, on the first day of the taxable year in which the entity is considered to be a member of a tiered structure, or such other taxable year determined in the discretion of the District Director;

(E) In the case of termination of S status, on the first day of the taxable year for which S status no longer exists;

(F) In the case of a personal service corporation that changes status, on the first day of the taxable year, for which the entity is no longer a personal service corporation.

In the case of a termination under this paragraph (a)(5) that results in a short taxable year, an income tax return is required for the short period. In order to allow the Service to process the affected income tax return in an efficient manner, a partnership, S corporation, or personal service corporation that files such a short period return should type or legibly print at the top of the first page of the income tax return for the short taxable year - “SECTION 444 ELECTION TERMINATED.” In addition, a personal service corporation that changes its taxable year to the required taxable year is required to annualize its income for the short period.

(iii)Example. The provisions of paragraph (a)(5)(ii) of this section may be illustrated by the following example.

Example.
Assume a partnership that is 100 percent owned, at all times, by calendar year individuals has historically used a June 30 taxable year. Also assume the partnership makes a valid section 444 election to retain a year ending June 30 for its taxable year beginning July 1, 1987. However, for its taxable year beginning July 1, 1988, the partnership changes to a calendar year, its required year. Based on these facts, the partnership's section 444 election is terminated on July 1, 1988, and the partnership must file a short period return for the period July 1, 1988-December 31, 1988. Furthermore, pursuant to § 1.702-3T(a)(1), the partners in such partnership are not entitled to a 4-year spread with respect to partnership items of income and expense for the taxable year beginning July 1, 1988 and ending December 31, 1988.

(iv)Special rule for entity that liquidates or is sold prior to making a section 444 election, required return, or required payment. A partnership, S corporation, or personal service corporation that is liquidated or sold for tax purposes before a section 444 election, required return, or required payment is made for a particular year may, nevertheless, make or continue a section 444 election, if otherwise qualified. (See §§ 1.7519-2T (a)(2) and 1.7519-1T (a)(3), respectively, for a description of the required return and a definition of the term “required payment.”) However, the partnership, S corporation, or personal service corporation (or a trustee or agent thereof) must comply with the requirements for making or continuing a section 444 election. Thus, if applicable, required payments must be made and a subsequent claim for refund must be made in accordance with § 1.7519-2T(a)(6). The following examples illustrate the application of this paragraph (a)(5)(iv).

Example 1.
Assume an existing S corporation historically used a June 30 taxable year and desires to make a section 444 election for its taxable year beginning July 1, 1987. Assume further that the S corporation is liquidated for tax purposes on February 15, 1988. If otherwise qualified, the S corporation (or a trustee or agent thereof) may make a section 444 election to have a taxable year beginning July 1, 1987, and ending February 15, 1988. However, if the S corporation makes a section 444 election, it must comply with the requirements for making a section 444 election, including making required payments.
Example 2.
The facts are the same as in Example 1, except that instead of liquidating on February 15, 1988, the shareholders of the S corporation sell their stock to a corporation on February 15, 1988. Thus, the corporation's S election is terminated on February 15, 1988. If otherwise qualified, the corporation may make a section 444 election to have a taxable year beginning July 1, 1987, and ending February 14, 1988.
Example 3.
The facts are the same as in Example 2, except that the new shareholders are individuals. Furthermore, the corporation's S election is not terminated. Based on these facts, the S corporation, if otherwise qualified, may make a section 444 election to retain a year ending June 30 for its taxable year beginning July 1, 1987. Furthermore, the S corporation may, if otherwise qualified, continue its section 444 election for subsequent taxable years.

(6)Re-activating certain S elections -

(i)Certain corporations electing S status that did not make a back-up calendar year request. If a corporation that timely filed Form 2553, Election by a Small Business Corporation, effective for its first taxable year beginning in 1987 -

(A) Requested a fiscal year based on business purpose,

(B) Did not agree to use a calendar year in the event its business purpose request was denied, and

(C) Such business purpose request is denied or withdrawn,

such corporation may retroactively re-activate its S election by making a valid section 444 election for its first taxable year beginning in 1987 and complying with the procedures in paragraph (a)(6)(iii) of this section.

(ii)Certain corporations that revoked their S status. If a corporation that used a fiscal year revoked its S election (pursuant to section 1362(d)(1)) for its first taxable year beginning in 1987, such corporation may retroactively re-activate its S election (i.e. rescind its revocation) by making a valid section 444 election for its first taxable year beginning in 1987 and complying with the procedures in paragraph (a)(6)(iii) of this section.

(iii)Procedures for re-activating an S election. A corporation re-activating its S election pursuant to paragraph (a)(6) (i) or (ii) of this section must -

(A) Obtain the consents of all shareholders who have owned stock in the corporation since the first day of the first taxable year of the corporation beginning after December 31, 1986,

(B) Include the following statement at the top of the first page of the corporation's Form 1120S for its first taxable year beginning in 1987 - “SECTION 444 ELECTION - RE-ACTIVATES S STATUS,” and

(C) Include the following statement with Form 1120S - “RE-ACTIVATION CONSENTED TO BY ALL SHAREHOLDERS WHO HAVE OWNED STOCK AT ANY TIME SINCE THE FIRST DAY OF THE FIRST TAXABLE YEAR OF THIS CORPORATION BEGINNING AFTER DECEMBER 31, 1986.”

(iv)Examples. The provisions of this paragraph (a)(6) may be illustrated by the following examples.

Example 1.
Assume a corporation historically used a June 30 taxable year and such corporation timely filed Form 2553, Election by a Small Business Corporation, to be effective for its taxable year beginning July 1, 1987. On its Form 2553, the corporation requested permission to retain its June 30 taxable year based on business purpose. However, the corporation did not agree to use a calendar year in the event its business purpose request was denied. On April 1, 1988, the Internal Revenue Service notified the corporation that its business purpose request was denied and therefore the corporation's S election was not effective. Pursuant to paragraph (a)(6)(i) of this section, the corporation may re-activate its S election by making a valid section 444 election and complying with the procedures in paragraph (a)(6)(iii) of this section.
Example 2.
The facts are the same as in Example 1, except that as of July 26, 1988, the Internal Revenue Service has not yet determined whether the corporation has a valid business purpose to retain a June 30 taxable year. Based on these facts, the corporation may, if otherwise qualified, make a back-up section 444 election as provided in § 1.444-3T(b)(4). If the corporation's business purpose request is subsequently denied, the corporation should follow the procedures in § 1.444-3T(b)(4)(iii) for activating a back-up section 444 election rather than the procedures provided in this paragraph (a)(6 for re-activating an S election.
Example 3.
Assume a corporation has historically been an S corporation with a March 31 taxable year. However, for its taxable year beginning April 1, 1987, the corporation revoked its S election pursuant to section 1362 (d)(1). Pursuant to paragraph (a)(6)(ii) of this section, such corporation may retroactively rescind its S election revocation by making a valid section 444 election for its taxable year beginning April 1, 1987, and complying with the procedures provided in paragraph (a)(6)(iii) of this section. If the corporation retroactively rescinds its S revocation, the corporation shall file a Form 1120S for its taxable year beginning April 1, 1987.

(b)Limitation on taxable years that may be elected -

(1)General rule. Except as provided in paragraphs (b)(2) and (3) of this section, a section 444 election may be made only if the deferral period (as defined in paragraph (b)(4) of this section) of the taxable year to be elected is not longer than three months.

(2)Changes in taxable year -

(i)In general. In the case of a partnership, S corporation, or personal service corporation changing its taxable year, such entity may make a section 444 election only if the deferral period of the taxable year to be elected is not longer than the shorter of -

(A) Three months, or

(B) The deferral period of the taxable year that is being changed, as defined in paragraph (b)(2)(iii) of this section.

(ii)Special rule for certain existing corporations electing S status. If a corporation with a taxable year other than the calendar year -

(A) Elected after September 18, 1986, and before January 1, 1988, under section 1362 of the Code to be an S corporation, and

(B) Elected to have the calendar year as the taxable year of the S corporation,

then, for taxable years beginning before 1989, paragraph (b)(2)(i) of this section shall be applied by taking into account the deferral period of the last taxable year of the corporation prior to electing to be an S corporation, rather than the deferral period of the taxable year that is being changed. Thus, the provisions of the preceding sentence do not apply to a corporation that elected to be an S corporation for its first taxable year.

(iii)Deferral period of the taxable year that is being changed. For purposes of paragraph (b)(2)(i)(B) of this section, the phrase “deferral period of the taxable year that is being changed” means the deferral period of the taxable year immediately preceding the taxable year for which the taxpayer desires to make a section 444 election. Furthermore, the deferral period of such year will be determined by using the required taxable year of the taxable year for which the taxpayer desires to make a section 444 election. For example, assume P, a partnership that has historically used a March 31 taxable year, desires to change to a September 30 taxable year by making a section 444 election for its taxable year beginning April 1, 1987. Furthermore, assume that pursuant to paragraph (a)(4) of this section, P's required taxable year for the taxable year beginning April 1, 1987 is a year ending December 31. Based on these facts the deferral period of the taxable year being changed is nine months (the period from March 31 to December 31).

(iv)Examples. See paragraph (d)(1) of this section for examples that illustrate the provisions of this paragraph (b)(2).

(3)Special rule for entities retaining 1986 taxable year. Notwithstanding paragraph (b)(2) of this section, a partnership, S corporation, or personal service corporation may, for its first taxable year beginning after December 31, 1986, if otherwise qualified, make a section 444 election to have a taxable year that is the same as the entity's last taxable year beginning in 1986. See paragraph (d)(2) of this section for examples that illustrate the provisions of this paragraph (b)(3).

(4)Deferral period -

(i)Retentions of taxable year. For a partnership, S corporation, or personal service corporation that desires to retain its taxable year by making a section 444 election, the term “deferral period” means the months between the beginning of such year and the close of the first required taxable year (as defined in paragraph (a)(4) of this section). The following example illustrates the application of this paragraph (b)(4)(i).

Example.
AB partnership has historically used a taxable year ending July 31. AB desires to retain its July 31 taxable year by making a section 444 election for its taxable year beginning August 1, 1987. Calendar year individuals, A and B, each own 50 percent of the profits and capital of AB; thus, under paragraph (a)(4) of this section AB's required taxable year is the year ending December 31. Pursuant to this paragraph (b)(4)(i), if AB desires to retain its year ending July 31, the deferral period is five months (the months between July 31 and December 31).

(ii)Adoptions of and changes in taxable year -

(A)In general. For a partnership, S corporation, or personal service corporation that desires to adopt or change its taxable year by making a section 444 election, the term “deferral period” means the months that occur after the end of the taxable year desired under section 444 and before the close of the required taxable year.

(B)Special rule. If a partnership, S corporation or personal service corporation is using the required taxable year as its taxable year, the deferral period is deemed to be zero.

(C)Examples. The provisions of this paragraph (b)(4)(ii) may be illustrated by the following examples.

Example 1.
Assume that CD partnership has historically used the calendar year and that CD's required taxable year is the calendar year. Under the special rule provided in paragraph (b)(4)(ii)(B) of this section, CD's deferral period is zero. See paragraph (b)(2)(i) of this section for rules that preclude CD from making a section 444 election to change its taxable year.
Example 2.
E, a newly formed partnership, began operations on December 1, 1987, and is owned by calendar year individuals. E desires to make a section 444 election to adopt a September 30 taxable year. E's required taxable year is December 31. Pursuant to paragraph (b)(4)(ii)(A) of this section E's deferral period for the taxable year beginning December 1, 1987, is three months (the number of months between September 30 and December 31).
Example 3.
Assume that F, a personal service corporation, has historically used a June 30 taxable year. F desires to make a section 444 election to change to an August 31 taxable year, effective for its taxable year beginning July 1, 1987. For purposes of determining the availability of a section 444 election for changing to the taxable year ending August 31, the deferral period of an August 31 taxable year is four months (the number of months between August 31 and December 31). The deferral period for F's existing June 30 taxable year is six months (the number of months between June 30 and December 31). Pursuant to § 1.444-1T(b)(2)(i), F may not make a section 444 election to change to an August 31 taxable year.

(5)Miscellaneous rules -

(i)Special rule for determining the taxable year of a corporation electing S status. For purposes of this section, and only for purposes of this section, a corporation that elected to be an S corporation for a taxable year beginning in 1987 or 1988 and which elected to be an S corporation prior to September 26, 1988, will not be considered to have adopted or changed its taxable year by virtue of information included on Form 2553, Election by a Small Business Corporation. See Example 8 in paragraph (d) of this section.

(ii)Special procedure for cases where an income tax return is superseded -

(A)In general. In the case of a partnership, S corporation, or personal service corporation that filed an income tax return for its first taxable year beginning after December 31, 1986, but subsequently makes a section 444 election that would result in a different year end for such taxable year, the income tax return filed pursuant to the section 444 election will supersede the original return. However, any payments of income tax made with respect to such superseded return will be credited to the taxpayer's superseding return and the taxpayer may file a claim for refund for such payments. See examples (5) and (7) in paragraph (d)(2) of this section.

(B)Procedure for superseding return. In order to allow the Service to process the affected income tax returns in an efficient manner, a partnership, S corporation, or personal service corporation that desires to supersede an income tax return in accordance with paragraph (b)(5)(ii)(A) of this section, should type or legibly print at the top of the first page of the income tax return for the taxable year elected - “SECTION 444 ELECTION - SUPERSEDES PRIOR RETURN.”

(iii)Anti-abuse rule - If an existing partnership, S corporation or personal service corporation (“predecessor entities”), or the owners thereof, transfer assets to a related party and the principal purpose of such transfer is to -

(A) Create a deferral period greater than the deferral period of the predecessor entity's taxable year, or

(B) Make a section 444 election following the termination of the predecessor entity's section 444 election,

then such transfer will be disregarded for purposes of section 444 and this section, even if the deferral created by such change is effectively eliminated by a required payment (within the meaning of section 7519) or deferral of a deduction (to a personal service corporation under section 280H). The following example illustrates the application of this paragraph (b)(5)(iii).
Example.
Assume that P1 is a partnership that historically used the calendar year and is owned by calendar year partners. Assume that P1 desires to make a section 444 election to change to a September year for the taxable year beginning January 1, 1988. P1 may not make a section 444 election to change taxable years under section 444(b)(2) because its current deferral period is zero. Assume further that P1 transfers a substantial portion of its assets to a newly-formed partnership (P2), which is owned by the partners of P1. Absent paragraph (b)(5)(iii) of this section, P2 could, if otherwise qualified, make a section 444 election under paragraph (b)(1) of this section to use a taxable year with a three month or less deferral period (i.e., a September 30, October 31, or November 30 taxable year). However, if the principal purpose of the asset transfer was to create a one-, two-, or three-month deferral period by P2 making a section 444 election, the section 444 election shall not be given effect, even if the deferral would be effectively eliminated by P2 making a required payment under section 7519.

(iv)Special rules for partial months and 52-53-week taxable years. Except as otherwise provided in § 1.280H-1T(c)(2)(i)(A), for purposes of this section and §§ 1.7519-1T, 1.7519-2T and 1.280H-1T -

(A) A month of less than 16 days is disregarded, and a month of more than 15 days is treated as a full month; and

(B) A 52-53-week taxable year with reference to the end of a particular month will be considered to be the same as a taxable year ending with reference to the last day of such month.

(c)Effective date. This section is effective for taxable years beginning after December 31, 1986.

(d)Examples -

(1)Changes in taxable year. The following examples illustrate the provisions of paragraph (b)(2) of this section.

Example 1.
A is a personal service corporation that historically used a June 30 taxable year. A desires to make a section 444 election to change to an August 31 taxable year, effective with its taxable year beginning July 1, 1987. Under paragraph (b)(4)(ii) of this section, the deferred period of the taxable year to be elected is four months (the number of months between August 31 and December 31). Furthermore, the deferral period of the taxable year that is being changed is six months (the number of months between June 30 and December 31). Pursuant to paragraph (b)(2)(i) of this section, a taxpayer may, if otherwise qualified, make a section 444 election to change to a taxable year only if the deferral period of the taxable year to be elected is not longer than the shorter of three months or the deferred period of the taxable year being changed. Since the deferral period of the taxable year to be elected (August 31) is greater than three months, A may not make a section 444 election to change to the taxable year ending August 31, However, since the deferral period of the taxable year that is being changed is three months or more, A may, if otherwise qualified, make a section 444 election to change to a year ending September 30, 1987 (three-month deferral period), a year ending October 31, 1987 (two-month deferral period), or a year ending November 30, 1987 (one-month deferral period). In addition, instead of making a section 444 election to change its taxable year, A could, if otherwise qualified, make a section 444 election to retain its June end, pursuant to paragraph (b)(3) of this section.
Example 2.
B, a corporation that historically used an August 31 taxable year, elected on November 1, 1986 to be an S corporation for its taxable year beginning September 1, 1986. As a condition to having the S election accepted, B agreed on Form 2553 to use calendar year. Pursuant to the general effective date provided in paragraph (c) of this section, B may not make a section 444 election for its taxable year beginning in 1986. Thus, B must file a short period income tax return for the period September 1 to December 31, 1986.
Example 3.
The facts are the same as in Example 2, except that B desires to make a section 444 election for its taxable year beginning January 1, 1987. Absent paragraph (b)(2)(ii) of this section, B would not be allowed to change its taxable year because the deferral period of the taxable year being changed (i.e., the calendar year) is zero. However, pursuant to the special rule provided in paragraph (b)(2)(ii) of this section, B shall apply paragraph (b)(2)(i) of this section by taking into account the deferral period of the last taxable year of B prior to B's election to be an S corporation (four months), rather than the deferral period of B's taxable year that is being changed (zero months). Thus, if otherwise qualified, B may make a section 444 election to change to a taxable year ending September 30, October 31, or November 30, for its taxable year beginning January 1, 1987.
Example 4.
The facts are the same as in Example 3, except that B files a calendar year income tax return for 1987 rather than making a section 444 election. However, for its taxable year beginning January 1, 1988, B desires to change its taxable year by making a section 444 election. Given that the special rule provided in paragraph (b)(2)(ii) of this section applies to section 444 elections made in taxable years beginning before 1989, B may, if otherwise qualified, make a section 444 election to change to a taxable year ending September 30, October 31, or November 30 for its taxable year beginning January 1, 1988.
Example 5.
C, a corporation that historically used a June 30 taxable year, elected on December 15, 1986 to be an S corporation for its taxable year beginning July 1, 1987. As a condition to having the S election accepted, C agreed on Form 2553 to use a calendar year. Although pursuant to paragraph (b)(3) of this section, C would, if otherwise qualified, be allowed to retain its June 30 taxable year, C desires to change to a September 30 taxable year by making a section 444 election. Pursuant to paragraph (b)(2) of this section, a taxpayer may, if otherwise qualified, make a section 444 election to change to a taxable year only if the deferral period of the taxable year to be elected is not longer than the shorter of three months or the deferral period of the taxable year being changed. Given these facts, the deferral period of the taxable year to be elected is 3 months (September 30 to December 31) while the deferral period of the taxable year being changed is 6 months (June 30 to December 31). Thus, C may, if otherwise qualified, change to a September 30 taxable year for its taxable year beginning July 1, 1987, by making a section 444 election. The fact that C agreed on Form 2553 to use a calendar year is not relevant.
Example 6.
D, a corporation that historically used a March 31 taxable year, elects on June 1, 1988 to be an S corporation for its taxable year beginning April 1, 1988. D desires to change to a June 30 taxable year by making a section 444 election for its taxable year beginning April 1, 1988. Pursuant to paragraph (b)(2)(i) of this section, D may not change to a June 30 taxable year because such year would have a deferral period greater than 3 months. However, if otherwise qualified, D may make a section 444 election to change to a taxable year ending September 30, October 31, or November 30 for its taxable year beginning April 1, 1988.
Example 7.
E, a corporation that began operations on November 1, 1986, elected to be an S corporation on December 15, 1986, for its taxable year beginning November 1, 1986. E filed a short period income tax return for the period November 1 to December 31, 1986. E desires to change to a September 30 taxable year by making a section 444 election for its taxable year beginning January 1, 1987. Although E elected to be an S corporation after September 18, 1986, and before January 1, 1988, paragraph (b)(2)(ii) of this section does not apply to E since E was not a C corporation prior to electing S status. Thus, E may not change its taxable year for the taxable year beginning January 1, 1987, by making a section 444 election.
Example 8.
The facts are the same as in Example 7, except that E began operations on April 15, 1987, and elected to be an S corporation on June 1, 1987, for its taxable year beginning April 15, 1987. As a condition to being an S corporation, E agreed on Form 2553 to use a calendar year. E desires to make a section 444 election to use a year ending September 30 for its taxable year beginning April 15, 1987. Pursuant to paragraph (b)(5)(i) of this section, E's agreement to use a calendar year on Form 2553 does not mean that E has adopted a calendar year. Thus, E's desire to make a section 444 election to use a September 30 taxable year will not be considered a change in taxable year and thus paragraph (b)(2) of this section will not apply. Instead, E will be subject to paragraph (b)(1) of this section. Since a September 30 taxable year would result in only a three-month deferral period (September 30 to December 31), E may, if otherwise qualified, make a section 444 election to use a year ending September 30 for its taxable year beginning April 15, 1987.

(2)Special rule for entities retaining their 1986 taxable year. The following examples illustrate the provisions of paragraph (b)(3) of this section.

Example 1.
F, an S corporation that elected to be an S corporation several years ago, has historically used a June 30 taxable year. F desires to retain its June 30 taxable year by making a section 444 election for its taxable year beginning July 1, 1987. Pursuant to paragraph (b)(4)(i) of this section, the deferral period of the taxable year being retained is 6 months (June 30 to December 31, F's required taxable year). Absent the special rule provided in paragraph (b)(3) of this section, F would be subject to the general rule provided in paragraph (b)(1) of this section which limits the deferral period of the taxable year elected to three months or less. However, pursuant to paragraph (b)(3) of this section, F may, if otherwise qualified, make a section 444 election to retain its year ending June 30 for its taxable year beginning July 1, 1987.
Example 2.
The facts are the same as in Example 1, except that F received permission from the Commissioner to change its taxable year to the calendar year, and filed a short period income tax return for the period July 1 to December 31, 1986. F desires to make a section 444 election to use a year ending June 30 for its taxable year beginning January 1, 1987. Given that F had a December 31 taxable year for its last taxable year beginning in 1986, the special rule provided in paragraph (b)(3) of this section does not allow F to use a June 30 taxable year for its taxable year beginning January 1, 1987. Furthermore, pursuant to paragraph (b)(2)(i) of this section, F is not allowed to change its taxable year from December 31 to June 30 because the deferral period of the taxable year being changed is zero months.
Example 3.
G, a corporation that historically used an August 31 taxable year, elected be an S corporation on November 15, 1986, for its taxable year beginning September 1, 1986. As a condition to obtaining S status, G agreed to use a calendar year. Thus, G filed its first S corporation return for the period September 1 to December 31, 1986. G desires to make a section 444 election to use a year ending August 31 for its taxable year beginning January 1, 1987. Since G's last taxable year beginning in 1986 was a calendar year, G cannot use paragraph (b)(3) of this section, relating to retentions of taxable years, to elect an August 31 taxable year. Thus, G is subject to paragraph (b)(2)(i) of this section, relating to changes in taxable year. Although G, if otherwise qualified, may use the special rule provided in paragraph (b)(2)(ii) of this section, G may only change from its current taxable year (i.e., the calendar year) to a taxable year that has no more than a three-month deferral period (i.e., September 30, October 31, or November 30).
Example 4.
The facts are the same as in Example 3, except that G elected to be an S corporation for its taxable year beginning September 1, 1987, rather than its taxable year beginning September 1, 1986. As a condition to making its S election, G agreed, on Form 2553, to use the calendar year. However, G has not yet filed a short period income tax return for the period September 1 to December 31, 1987. Given these facts, paragraph (b)(3) of this section would allow G, if otherwise qualified, to make a section 444 election to retain an August 31 taxable year for its taxable year beginning September 1, 1987.
Example 5.
The facts are the same as in Example 4, except that G has already filed a short period income tax return for the period September 1 to December 31, 1987. Pursuant to paragraph (b)(5)(ii)(A) of this section, G may supersede the return it filed for the period September 1 to December 31, 1987. Thus, pursuant to paragraph (b)(3) of this section, G may, if otherwise qualified, make a section 444 election to retain an August 31 taxable year for the taxable year beginning September 1, 1987. In addition, G should follow the special procedures set forth in paragraph (b)(5)(ii)(B) of this section.
Example 6.
H, a corporation that historically used a May 31 taxable year, elects to be an S corporation on June 15, 1988 for its taxable year beginning June 1, 1988. H desires to make a section 444 election to use a taxable year other than the calendar year. Since the taxable year in issue is not H's first taxable year beginning after December 31, 1986, H may not use the special rule provided in paragraph (b)(3)(i) and thus may not retain its May 31 year. However, H may, if otherwise qualified, make a section 444 election under paragraph (b)(2)(i) of this section, to change to a taxable year that has no more than a three-month deferral period (i.e., September 30, October 31, or November 30) for its taxable year beginning June 1, 1988.
Example 7.
I is a partnership that has historically used a calendar year. Sixty percent of the profits and capital of I are owned by Q, a corporation (that is neither an S corporation nor a personal service corporation) that has a June 30 taxable year, and 40 percent of the profits and capital are owned by R, a calendar year individual. Since the partner that has more than a fifty percent interest in I has a June 30 taxable year, I's required taxable year is June 30. Accordingly, I filed an income tax return for the period January 1 to June 30, 1987. Based on these facts, I may, pursuant to paragraph (b)(5)(ii)(A) of this section, disregard the income tax return filed for the period January 1 to June 30, 1987. Thus, if otherwise qualified, I may make a section 444 election under paragraph (b)(2)(i) of this section to use a calendar year for its taxable year beginning January 1, 1987. If I makes such a section 444 election, I should follow the special procedures set forth in paragraph (b)(5)(ii)(B) of this section.
[T.D. 8205, 53 FR 19694, May 27, 1988, as amended by T.D. 8996, 67 FR 35012, May 17, 2002]

This is a list of United States Code sections, Statutes at Large, Public Laws, and Presidential Documents, which provide rulemaking authority for this CFR Part.

This list is taken from the Parallel Table of Authorities and Rules provided by GPO [Government Printing Office].

It is not guaranteed to be accurate or up-to-date, though we do refresh the database weekly. More limitations on accuracy are described at the GPO site.


United States Code
U.S. Code: Title 26 - INTERNAL REVENUE CODE

§ 1 - Tax imposed

§ 21 - Expenses for household and dependent care services necessary for gainful employment

§ 23 - Adoption expenses

§ 25 - Interest on certain home mortgages

§ 25A - Hope and Lifetime Learning credits

§ 28 - Renumbered § 45C]

§ 30 - Repealed. Pub. L. 113–295, div. A, title II, § 221(a)(2)(A), Dec. 19, 2014, 128 Stat. 4037]

§ 36B - Refundable credit for coverage under a qualified health plan

§ 38 - General business credit

§ 40 - Alcohol, etc., used as fuel

§ 41 - Credit for increasing research activities

§ 42 - Low-income housing credit

§ 43 - Enhanced oil recovery credit

§ 45D - New markets tax credit

§ 46 - Amount of credit

§ 47 - Rehabilitation credit

§ 52 - Special rules

§ 56 - Adjustments in computing alternative minimum taxable income

§ 58 - Denial of certain losses

§ 61 - Gross income defined

§ 62 - Adjusted gross income defined

§ 66 - Treatment of community income

§ 67 - 2-percent floor on miscellaneous itemized deductions

§ 72 - Annuities; certain proceeds of endowment and life insurance contracts

§ 101 - Certain death benefits

§ 103 - Interest on State and local bonds

§ 103A - Repealed. Pub. L. 99–514, title XIII, § 1301(j)(1), Oct. 22, 1986, 100 Stat. 2657]

§ 108 - Income from discharge of indebtedness

§ 110 - Qualified lessee construction allowances for short-term leases

§ 129 - Dependent care assistance programs

§ 132 - Certain fringe benefits

§ 148 - Arbitrage

§ 149 - Bonds must be registered to be tax exempt; other requirements

§ 150 - Definitions and special rules

§ 152 - Dependent defined

§ 162 - Trade or business expenses

§ 163 - Interest

§ 165 - Losses

§ 166 - Bad debts

§ 168 - Accelerated cost recovery system

§ 170 - Charitable, etc., contributions and gifts

§ 171 - Amortizable bond premium

§ 179 - Election to expense certain depreciable business assets

§ 179A - Repealed. Pub. L. 113–295, div. A, title II, § 221(a)(34)(A), Dec. 19, 2014, 128 Stat. 4042]

§ 197 - Amortization of goodwill and certain other intangibles

§ 199 - Income attributable to domestic production activities

§ 216 - Deduction of taxes, interest, and business depreciation by cooperative housing corporation tenant-stockholder

§ 221 - Interest on education loans

§ 263A - Capitalization and inclusion in inventory costs of certain expenses

§ 267 - Losses, expenses, and interest with respect to transactions between related taxpayers

§ 274 - Disallowance of certain entertainment, etc., expenses

§ 280C - Certain expenses for which credits are allowable

§ 280F - Limitation on depreciation for luxury automobiles; limitation where certain property used for personal purposes

§ 280G - Golden parachute payments

§ 301 - Distributions of property

§ 304 - Redemption through use of related corporations

§ 305 - Distributions of stock and stock rights

§ 324

§ 336 - Gain or loss recognized on property distributed in complete liquidation

§ 337 - Nonrecognition for property distributed to parent in complete liquidation of subsidiary

§ 338 - Certain stock purchases treated as asset acquisitions

§ 351 - Transfer to corporation controlled by transferor

§ 355 - Distribution of stock and securities of a controlled corporation

§ 357 - Assumption of liability

§ 358 - Basis to distributees

§ 362 - Basis to corporations

§ 367 - Foreign corporations

§ 382 - Limitation on net operating loss carryforwards and certain built-in losses following ownership change

§ 383 - Special limitations on certain excess credits, etc.

§ 401 - Qualified pension, profit-sharing, and stock bonus plans

§ 401 note - Qualified pension, profit-sharing, and stock bonus plans

§ 402A - Optional treatment of elective deferrals as Roth contributions

§ 403 - Taxation of employee annuities

§ 404 - Deduction for contributions of an employer to an employees’ trust or annuity plan and compensation under a deferred-payment plan

§ 408 - Individual retirement accounts

§ 408A - Roth IRAs

§ 409 - Qualifications for tax credit employee stock ownership plans

§ 410 - Minimum participation standards

§ 411 - Minimum vesting standards

§ 414 - Definitions and special rules

§ 417 - Definitions and special rules for purposes of minimum survivor annuity requirements

§ 419A - Qualified asset account; limitation on additions to account

§ 420 - Transfers of excess pension assets to retiree health accounts

§ 441 - Period for computation of taxable income

§ 442 - Change of annual accounting period

§ 444 - Election of taxable year other than required taxable year

§ 446 - General rule for methods of accounting

§ 453 - Installment method

§ 453A - Special rules for nondealers

§ 458 - Magazines, paperbacks, and records returned after the close of the taxable year

§ 460 - Special rules for long-term contracts

§ 461 - General rule for taxable year of deduction

§ 465 - Deductions limited to amount at risk

§ 466 - Repealed. Pub. L. 99–514, title VIII, § 823(a), Oct. 22, 1986, 100 Stat. 2373]

§ 467 - Certain payments for the use of property or services

§ 468A - Special rules for nuclear decommissioning costs

§ 468B - Special rules for designated settlement funds

§ 469 - Passive activity losses and credits limited

§ 471 - General rule for inventories

§ 472 - Last-in, first-out inventories

§ 475 - Mark to market accounting method for dealers in securities

§ 481 - Adjustments required by changes in method of accounting

§ 482 - Allocation of income and deductions among taxpayers

§ 483 - Interest on certain deferred payments

§ 493

§ 504 - Status after organization ceases to qualify for exemption under section 501(c)(3) because of substantial lobbying or because of political activities

§ 514 - Unrelated debt-financed income

§ 527 - Political organizations

§ 585 - Reserves for losses on loans of banks

§ 597 - Treatment of transactions in which Federal financial assistance provided

§ 642 - Special rules for credits and deductions

§ 643 - Definitions applicable to subparts A, B, C, and D

§ 645 - Certain revocable trusts treated as part of estate

§ 663 - Special rules applicable to sections 661 and 662

§ 664 - Charitable remainder trusts

§ 672 - Definitions and rules

§ 679 - Foreign trusts having one or more United States beneficiaries

§ 701 - Partners, not partnership, subject to tax

§ 702 - Income and credits of partner

§ 703 - Partnership computations

§ 704 - Partner’s distributive share

§ 705 - Determination of basis of partner’s interest

§ 706 - Taxable years of partner and partnership

§ 707 - Transactions between partner and partnership

§ 708 - Continuation of partnership

§ 709 - Treatment of organization and syndication fees

§ 721 - Nonrecognition of gain or loss on contribution

§ 722 - Basis of contributing partner’s interest

§ 723 - Basis of property contributed to partnership

§ 724 - Character of gain or loss on contributed unrealized receivables, inventory items, and capital loss property

§ 731 - Extent of recognition of gain or loss on distribution

§ 732 - Basis of distributed property other than money

§ 733 - Basis of distributee partner’s interest

§ 734 - Adjustment to basis of undistributed partnership property where section 754 election or substantial basis reduction

§ 735 - Character of gain or loss on disposition of distributed property

§ 736 - Payments to a retiring partner or a deceased partner’s successor in interest

§ 737 - Recognition of precontribution gain in case of certain distributions to contributing partner

§ 741 - Recognition and character of gain or loss on sale or exchange

§ 742 - Basis of transferee partner’s interest

§ 743 - Special rules where section 754 election or substantial built-in loss

§ 751 - Unrealized receivables and inventory items

§ 752 - Treatment of certain liabilities

§ 753 - Partner receiving income in respect of decedent

§ 754 - Manner of electing optional adjustment to basis of partnership property

§ 755 - Rules for allocation of basis

§ 761 - Terms defined

§ 809 - Repealed. Pub. L. 108–218, title II, § 205(a), Apr. 10, 2004, 118 Stat. 610]

§ 817A - Special rules for modified guaranteed contracts

§ 832 - Insurance company taxable income

§ 845 - Certain reinsurance agreements

§ 846 - Discounted unpaid losses defined

§ 848 - Capitalization of certain policy acquisition expenses

§ 852 - Taxation of regulated investment companies and their shareholders

§ 860E - Treatment of income in excess of daily accruals on residual interests

§ 860G - Other definitions and special rules

§ 863 - Special rules for determining source

§ 864 - Definitions and special rules

§ 865 - Source rules for personal property sales

§ 874 - Allowance of deductions and credits

§ 882 - Tax on income of foreign corporations connected with United States business

§ 883 - Exclusions from gross income

§ 884 - Branch profits tax

§ 892 - Income of foreign governments and of international organizations

§ 894 - Income affected by treaty

§ 897 - Disposition of investment in United States real property

§ 901 - Taxes of foreign countries and of possessions of United States

§ 902 - Deemed paid credit where domestic corporation owns 10 percent or more of voting stock of foreign corporation

§ 904 - Limitation on credit

§ 907 - Special rules in case of foreign oil and gas income

§ 911 - Citizens or residents of the United States living abroad

§ 924

§ 925

§ 927

§ 934 - Limitation on reduction in income tax liability incurred to the Virgin Islands

§ 936 - Puerto Rico and possession tax credit

§ 937 - Residence and source rules involving possessions

§ 954 - Foreign base company income

§ 956 - Investment of earnings in United States property

§ 957 - Controlled foreign corporations; United States persons

§ 960 - Special rules for foreign tax credit

§ 963 - Repealed. Pub. L. 94–12, title VI, § 602(a)(1), Mar. 29, 1975, 89 Stat. 58]

§ 985 - Functional currency

§ 987 - Branch transactions

§ 988 - Treatment of certain foreign currency transactions

§ 989 - Other definitions and special rules

§ 1017 - Discharge of indebtedness

§ 1032 - Exchange of stock for property

§ 1059 - Corporate shareholder’s basis in stock reduced by nontaxed portion of extraordinary dividends

§ 1060 - Special allocation rules for certain asset acquisitions

§ 1092 - Straddles

§ 1202 - Partial exclusion for gain from certain small business stock

§ 1221 - Capital asset defined

§ 1244 - Losses on small business stock

§ 1248 - Gain from certain sales or exchanges of stock in certain foreign corporations

§ 1254 - Gain from disposition of interest in oil, gas, geothermal, or other mineral properties

§ 1275 - Other definitions and special rules

§ 1286 - Tax treatment of stripped bonds

§ 1291 - Interest on tax deferral

§ 1293 - Current taxation of income from qualified electing funds

§ 1294 - Election to extend time for payment of tax on undistributed earnings

§ 1295 - Qualified electing fund

§ 1296 - Election of mark to market for marketable stock

§ 1297 - Passive foreign investment company

§ 1298 - Special rules

§ 1301 - Averaging of farm income

§ 1361 - S corporation defined

§ 1368 - Distributions

§ 1374 - Tax imposed on certain built-in gains

§ 1377 - Definitions and special rule

§ 1378 - Taxable year of S corporation

§ 1397D - Qualified zone property defined

§ 1397E - Credit to holders of qualified zone academy bonds

§ 1402 - Definitions

§ 1441 - Withholding of tax on nonresident aliens

§ 1443 - Foreign tax-exempt organizations

§ 1445 - Withholding of tax on dispositions of United States real property interests

§ 1471 - Withholdable payments to foreign financial institutions

§ 1472 - Withholdable payments to other foreign entities

§ 1473 - Definitions

§ 1474 - Special rules

§ 1502 - Regulations

§ 1503 - Computation and payment of tax

§ 1504 - Definitions

§ 1561 - Limitations on certain multiple tax benefits in the case of certain controlled corporations

§ 3401 - Definitions

§ 5000 - Certain group health plans

§ 5000A - Requirement to maintain minimum essential coverage

§ 6001 - Notice or regulations requiring records, statements, and special returns

§ 6011 - General requirement of return, statement, or list

§ 6015 - Relief from joint and several liability on joint return

§ 6033 - Returns by exempt organizations

§ 6035 - Basis information to persons acquiring property from decedent

§ 6038 - Information reporting with respect to certain foreign corporations and partnerships

§ 6038A - Information with respect to certain foreign-owned corporations

§ 6038B - Notice of certain transfers to foreign persons

§ 6038D - Information with respect to foreign financial assets

§ 6039I - Returns and records with respect to employer-owned life insurance contracts

§ 6041 - Information at source

§ 6043 - Liquidating, etc., transactions

§ 6045 - Returns of brokers

§ 6046A - Returns as to interests in foreign partnerships

§ 6049 - Returns regarding payments of interest

§ 6050E - State and local income tax refunds

§ 6050H - Returns relating to mortgage interest received in trade or business from individuals

§ 6050I-1

§ 6050K - Returns relating to exchanges of certain partnership interests

§ 6050M - Returns relating to persons receiving contracts from Federal executive agencies

§ 6050P - Returns relating to the cancellation of indebtedness by certain entities

§ 6050S - Returns relating to higher education tuition and related expenses

§ 6060 - Information returns of tax return preparers

§ 6061 - Signing of returns and other documents

§ 6065 - Verification of returns

§ 6081 - Extension of time for filing returns

§ 6103 - Confidentiality and disclosure of returns and return information

§ 6109 - Identifying numbers

§ 6302 - Mode or time of collection

§ 6402 - Authority to make credits or refunds

§ 6411 - Tentative carryback and refund adjustments

§ 6655 - Failure by corporation to pay estimated income tax

§ 6662 - Imposition of accuracy-related penalty on underpayments

§ 6695 - Other assessable penalties with respect to the preparation of tax returns for other persons

§ 6851 - Termination assessments of income tax

§ 7520 - Valuation tables

§ 7654 - Coordination of United States and certain possession individual income taxes

§ 7701 - Definitions

§ 7702 - Life insurance contract defined

§ 7805 - Rules and regulations

§ 7872 - Treatment of loans with below-market interest rates

§ 7874 - Rules relating to expatriated entities and their foreign parents

U.S. Code: Title 29 - LABOR
Statutes at Large
Public Laws
Presidential Documents

Reorganization ... 1978 Plan No. 4

Title 26 published on 16-Jun-2017 03:58

The following are ALL rules, proposed rules, and notices (chronologically) published in the Federal Register relating to 26 CFR Part 1 after this date.

  • 2017-06-30; vol. 82 # 125 - Friday, June 30, 2017
    1. 82 FR 29719 - Regulations Regarding Withholding of Tax on Certain U.S. Source Income Paid to Foreign Persons, Information Reporting and Backup Withholding on Payments Made to Certain U.S. Persons, and Portfolio Interest Treatment; Correction
      GPO FDSys XML | Text
      DEPARTMENT OF THE TREASURY, Internal Revenue Service
      Correcting amendment.
        Effective Date: These corrections are effective June 30, 2017. Applicability Date: The corrections to §§ 1.1441-0; 1.1441-1(b)(7)(ii)(B), (e)(3)(iv)(B) and (C), (e)(4)(ii)(B)( 11 ), (e)(4)(ix)(D), (e)(5)(ii) through (e)(5)(ii)(B), (e)(5)(ii)(D) through (e)(5)(v)(B)( 3 ), (e)(5)(v)(B)( 5 ) through (e)(5)(v)(D), and (f) through (f)(4); 1.1441-1T; 1.1441-3(d)(1); 1.1441-4; 1.6045-1(m)(2)(ii) and (n)(12)(ii); and 1.6049-5(c)(1) through (c)(4) are applicable on January 6, 2017.
      26 CFR Part 1

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