26 U.S. Code § 1371 - Coordination with subchapter C
Except as otherwise provided in this title, and except to the extent inconsistent with this subchapter, subchapter C shall apply to an S corporation and its shareholders.
No carryforward, and no carryback, arising for a taxable year for which a corporation is a C corporation may be carried to a taxable year for which such corporation is an S corporation.
No carryforward, and no carryback, shall arise at the corporate level for a taxable year for which a corporation is an S corporation.
Except as provided in paragraphs (2) and (3) and subsection (d)(3), no adjustment shall be made to the earnings and profits of an S corporation.
In the case of any transaction involving the application of subchapter C to any S corporation, proper adjustment to any accumulated earnings and profits of the corporation shall be made.
Any election under section 1362 shall be treated as a mere change in the form of conducting a trade or business for purposes of the second sentence of section 50(a)(4).
Notwithstanding an election under section 1362, an S corporation shall continue to be liable for any increase in tax under section 49(b) or 50(a) attributable to credits allowed for taxable years for which such corporation was not an S corporation.
Any distribution of money by a corporation with respect to its stock during a post-termination transition period shall be applied against and reduce the adjusted basis of the stock, to the extent that the amount of the distribution does not exceed the accumulated adjustments account (within the meaning of section 1368(e)).
An S corporation may elect to have paragraph (1) not apply to all distributions made during a post-termination transition period described in section 1377(b)(1)(A). Such election shall not be effective unless all shareholders of the S corporation to whom distributions are made by the S corporation during such post-termination transition period consent to such election.
A prior section 1371, added Pub. L. 85–866, title I, § 64(a), Sept. 2, 1958, 72 Stat. 1650; amended Pub. L. 86–376, § 2(a), Sept. 23, 1959, 73 Stat. 699; Pub. L. 88–272, title II, § 233(a), Feb. 26, 1964, 78 Stat. 112; Pub. L. 94–455, title IX, § 902(a)(1), (2), (c)(1), (2), Oct. 4, 1976, 90 Stat. 1608, 1609; Pub. L. 95–600, title III, §§ 341, 342, title VII, § 701(y)(1), Nov. 6, 1978, 92 Stat. 2843, 2921; Pub. L. 96–589, § 5(d), Dec. 24, 1980, 94 Stat. 3406; Pub. L. 97–34, title II, §§ 233(a), 234(a), (b), Aug. 13, 1981, 95 Stat. 250, 251; Pub. L. 97–448, title I, § 102(i)(1), Jan. 12, 1983, 96 Stat. 2372, related to definitions applicable to election of small business corporations as to taxable status, prior to the general revision of this subchapter by section 2 of Pub. L. 97–354.
1996—Subsec. (a). Pub. L. 104–188 reenacted heading without change and amended text generally. Prior to amendment, text read as follows:
“(1) In general.—Except as otherwise provided in this title, and except to the extent inconsistent with this subchapter, subchapter C shall apply to an S corporation and its shareholders.
“(2) S corporation as shareholder treated like individual.—For purposes of subchapter C, an S corporation in its capacity as a shareholder of another corporation shall be treated as an individual.”
1990—Subsec. (d)(1). Pub. L. 101–508, § 11813(b)(23)(A), substituted “section 50(a)(4)” for “section 47(b)”.
Subsec. (d)(2), (3). Pub. L. 101–508, § 11813(b)(23)(B), substituted “section 49(b) or 50(a)” for “section 47”.
1986—Subsec. (e)(1). Pub. L. 99–514, § 1899A(33), inserted “(within the meaning of section 1368(e))”.
Subsec. (e)(2). Pub. L. 99–514, § 1899A(34), struck out “(within the meaning of section 1368(e))” after “to such election”.
1984—Subsec. (c)(1). Pub. L. 98–369, § 621(e)(2), substituted “paragraphs (2) and (3) and subsection (d)(3)” for “paragraphs (2) and (3)”.
Subsec. (d)(3). Pub. L. 98–369, § 721(e)(1), added par. (3).
Subsec. (e). Pub. L. 98–369, § 721(o), amended subsec. (e) generally, designating existing provisions as par. (1) and adding par. (2).
Subsec. (e)(2). Pub. L. 98–369, § 721(x)(3), inserted “(within the meaning of section 1368(e))”.
Amendment by Pub. L. 101–508 applicable to property placed in service after Dec. 31, 1990, but not applicable to any transition property (as defined in section 49(e) of this title), any property with respect to which qualified progress expenditures were previously taken into account under section 46(d) of this title, and any property described in section 46(b)(2)(C) of this title, as such sections were in effect on Nov. 4, 1990, see section 11813(c) of Pub. L. 101–508, set out as a note under section 45K of this title.
Amendment by Pub. L. 98–369 effective as if included in the 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.
For provisions that nothing in amendment by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.
Written determinations for this section
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- Distributions : 2001-03-16
- Coordination with Subchapter C Rules : 2001-03-16
- Accumulated Adjustments Account : 2000-10-13
- Distribution to which Section 301 Applies : 2000-10-13
- Coordination with Subchapter C Rules : 2000-10-13
- Accumulated Adjustments Account : 1999-11-12
- Constructive Dividend : 1999-11-12
- Coordination with Subchapter C Rules : 1999-11-12