26 U.S. Code § 1377 - Definitions and special rule
Under regulations prescribed by the Secretary, if any shareholder terminates the shareholder’s interest in the corporation during the taxable year and all affected shareholders and the corporation agree to the application of this paragraph, paragraph (1) shall be applied to the affected shareholders as if the taxable year consisted of 2 taxable years the first of which ends on the date of the termination.
For purposes of subparagraph (A), the term “affected shareholders” means the shareholder whose interest is terminated and all shareholders to whom such shareholder has transferred shares during the taxable year. If such shareholder has transferred shares to the corporation, the term “affected shareholders” shall include all persons who are shareholders during the taxable year.
Paragraph (1)(B) shall not apply for purposes of section 1366(d)(3).
Paragraph (1)(B) shall apply to a distribution described in section 1371(e) only to the extent that the amount of such distribution does not exceed the aggregate increase (if any) in the accumulated adjustments account (within the meaning of section 1368(e)) by reason of the adjustments referred to in such paragraph.
Any election under this subchapter, and any revocation under section 1362(d)(1), shall be made in such manner as the Secretary shall by regulations prescribe.
A prior section 1377, added Pub. L. 85–866, title I, § 64(a), Sept. 2, 1958, 72 Stat. 1656; amended Pub. L. 94–455, title IX, § 902(b)(1), title XIX, § 1901(b)(32)(B)(iv), Oct. 4, 1976, 90 Stat. 1608, 1800, related to special rules applicable to earnings and profits of electing small business corporations, prior to the general revision of this subchapter by section 2 of Pub. L. 97–354.
2004—Subsec. (b)(3). Pub. L. 108–311 added par. (3).
1996—Subsec. (a)(2). Pub. L. 104–188, § 1306, reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “Under regulations prescribed by the Secretary, if any shareholder terminates his interest in the corporation during the taxable year and all persons who are shareholders during the taxable year agree to the application of this paragraph, paragraph (1) shall be applied as if the taxable year consisted of 2 taxable years the first of which ends on the date of the termination.”
Subsec. (b)(1)(A) to (C). Pub. L. 104–188, § 1307(a), struck out “and” at end of subpar. (A)(ii), added subpar. (B), and redesignated former subpar. (B) as (C).
Subsec. (b)(2)(A) to (C). Pub. L. 104–188, § 1307(b), added subpar. (A), redesignated subpar. (C) as (B), and struck out former subpars. (A) and (B) which read as follows:
“(A) a court decision which becomes final,
“(B) a closing agreement, or”.
Amendment by Pub. L. 108–311 effective as if included in the provisions of the Small Business Job Protection Act of 1996, Pub. L. 104–188, to which such amendment relates, see section 407(c) of Pub. L. 108–311, set out as a note under section 401 of this title.
Written determinations for this section
These documents, sometimes referred to as "Private Letter Rulings", are taken from the IRS Written Determinations page; the IRS also publishes a fuller explanation of what they are and what they mean. The collection is updated (at our end) daily. It appears that the IRS updates their listing every Friday.
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- Definitions and Special Rules : 2006-08-18
- Number of Shareholders : 2006-08-18
- Pass-Thru of Items to Shareholders : 2002-07-26
- Post-termination Transition Period : 2002-07-26
- Pass-Thru of Items to Shareholders : 2002-06-07
- Post-termination Transition Period : 2002-06-07
- Pass-Thru of Items to Shareholders : 2002-02-15
- Post-termination Transition Period : 2002-02-15
- Definitions and Special Rules : 2001-04-27
- Liquidation v. Reorganization : 2001-04-27
- Distributions : 2001-04-27
- Liquidation in a Reorganization : 2001-04-27
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