Source: https://www.law.cornell.edu/uscode/text/26/1374?qt-us_code_tabs=0
Timestamp: 2015-04-28 03:13:19
Document Index: 240555157

Matched Legal Cases: ['§ 2', '§ 305', '§ 102', '§ 474', '§ 721', '§ 632', '§ 1006', '§ 7811', '§ 1601', '§ 1251', '§ 2014', '§ 326', '§ 64', '§ 2', '§ 1901', '§ 326', '§ 326', '§ 326', '§ 7811', '§ 7811', '§ 7811', '§ 7811', '§ 1006', '§ 1006', '§ 1006', '§ 1006', '§ 1006', '§ 1006', '§ 1006', '§ 474', '§ 721', '§ 102', '§ 326', '§ 2014', '§ 1251']

Corporations which were always S corporations Subsection (a) shall not apply to any corporation if an election under section 1362
(a) has been in effect with respect to such corporation for each of its taxable years. Except as provided in regulations, an S corporation and any predecessor corporation shall be treated as 1 corporation for purposes of the preceding sentence.
Limitation on amount of recognized built-in gains The amount of the net recognized built-in gain taken into account under this section for any taxable year shall not exceed the excess (if any) of—
Net unrealized built-in gain The term “net unrealized built-in gain” means the amount (if any) by which—
the fair market value of the assets of the S corporation as of the beginning of its 1st taxable year for which an election under section 1362
(a) is in effect, exceeds
Net recognized built-in gain (A)
In general The term “net recognized built-in gain” means, with respect to any taxable year in the recognition period, the lesser of—
such corporation’s taxable income for such taxable year (determined as provided in section 1375
Carryover If, for any taxable year described in subparagraph (A), the amount referred to in clause (i) of subparagraph (A) exceeds the amount referred to in clause (ii) of subparagraph (A), such excess shall be treated as a recognized built-in gain in the succeeding taxable year. The preceding sentence shall apply only in the case of a corporation treated as an S corporation by reason of an election made on or after March 31, 1988.
Recognized built-in gain The term “recognized built-in gain” means any gain recognized during the recognition period on the disposition of any asset except to the extent that the S corporation establishes that—
Recognized built-in losses The term “recognized built-in loss” means any loss recognized during the recognition period on the disposition of any asset to the extent that the S corporation establishes that—
Income items Any item of income which is properly taken into account during the recognition period but which is attributable to periods before the 1st taxable year for which the corporation was an S corporation shall be treated as a recognized built-in gain for the taxable year in which it is properly taken into account.
Deduction items Any amount which is allowable as a deduction during the recognition period (determined without regard to any carryover) but which is attributable to periods before the 1st taxable year referred to in subparagraph (A) shall be treated as a recognized built-in loss for the taxable year for which it is allowable as a deduction.
Adjustment to net unrealized built-in gain The amount of the net unrealized built-in gain shall be properly adjusted for amounts which would be treated as recognized built-in gains or losses under this paragraph if such amounts were properly taken into account (or allowable as a deduction) during the recognition period.
Treatment of certain property If the adjusted basis of any asset is determined (in whole or in part) by reference to the adjusted basis of any other asset held by the S corporation as of the beginning of the 1st taxable year referred to in paragraph (3)—
Recognition period (A)
In general The term “recognition period” means the 10-year period beginning with the 1st day of the 1st taxable year for which the corporation was an S corporation.
Special rules for 2009, 2010, and 2011 No tax shall be imposed on the net recognized built-in gain of an S corporation—
Special rule for 2012 and 2013 For purposes of determining the net recognized built-in gain for taxable years beginning in 2012 or 2013, subparagraphs (A) and (D) shall be applied by substituting “5-year” for “10-year”.
Special rule for distributions to shareholders For purposes of applying this section to any amount includible in income by reason of distributions to shareholders pursuant to section 593
Installment sales If an S corporation sells an asset and reports the income from the sale using the installment method under section 453, the treatment of all payments received shall be governed by the provisions of this paragraph applicable to the taxable year in which such sale was made.
Treatment of transfer of assets from C corporation to S corporation (A)
In general Except to the extent provided in regulations, if—
Modifications For purposes of this paragraph, the modifications of this subparagraph are as follows:
Subsection (c)(1) not to apply
Reference to 1st taxable year Any reference in this section to the 1st taxable year for which the corporation was an S corporation shall be treated as a reference to the 1st taxable year for which the corporation was an S corporation pursuant to its most recent election under section 1362.
Regulations The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section including regulations providing for the appropriate treatment of successor corporations.
(Added Pub. L. 97–354, § 2,Oct. 19, 1982, 96 Stat. 1683; amended Pub. L. 97–448, title III, § 305(d)(3),Jan. 12, 1983, 96 Stat. 2400; Pub. L. 98–369, div. A, title I, § 102(d)(1), title IV, § 474(r)(27), title VII, § 721(u),July 18, 1984, 98 Stat. 623, 844, 971; Pub. L. 99–514, title VI, § 632(a),Oct. 22, 1986, 100 Stat. 2275; Pub. L. 100–647, title I, § 1006(f)(1)–(5)(A), Nov. 10, 1988, 102 Stat. 3403, 3404; Pub. L. 101–239, title VII, § 7811(c)(4), (5)(B), (8),Dec. 19, 1989, 103 Stat. 2407, 2408; Pub. L. 105–34, title XVI, § 1601(f)(5)(B),Aug. 5, 1997, 111 Stat. 1091; Pub. L. 111–5, div. B, title I, § 1251(a),Feb. 17, 2009, 123 Stat. 342; Pub. L. 111–240, title II, § 2014(a),Sept. 27, 2010, 124 Stat. 2556; Pub. L. 112–240, title III, § 326(a), (b),Jan. 2, 2013, 126 Stat. 2334.)
A prior section 1374, added Pub. L. 85–866, title I, § 64(a),Sept. 2, 1958, 72 Stat. 1653; amended Pub. L. 86–376, § 2(b),Sept. 23, 1959, 73 Stat. 699; Pub. L. 94–455, title XIX, § 1901(a)(150),Oct. 4, 1976, 90 Stat. 1788, related to allowance to shareholders of corporation net operating loss, prior to the general revision of this subchapter by section 2 ofPub. L. 97–354.
2013—Subsec. (d)(2)(B). Pub. L. 112–240, § 326(b), inserted “described in subparagraph (A)” after “for any taxable year”.
Subsec. (d)(7)(C), (D). Pub. L. 112–240, § 326(a)(1), (2), added subpar. (C) and redesignated former subpar. (C) as (D).
Subsec. (d)(7)(E). Pub. L. 112–240, § 326(a)(3), added subpar. (E).
2010—Subsec. (d)(7)(B). Pub. L. 111–240amended subpar. (B) generally. Prior to amendment, text read as follows: “In the case of any taxable year beginning in 2009 or 2010, no tax shall be imposed on the net recognized built-in gain of an S corporation if the 7th taxable year in the recognition period preceded such taxable year. The preceding sentence shall be applied separately with respect to any asset to which paragraph (8) applies.”
2009—Subsec. (d)(7). Pub. L. 111–5amended par. (7) generally. Prior to amendment, text read as follows: “The term ‘recognition period’ means the 10-year period beginning with the 1st day of the 1st taxable year for which the corporation was an S corporation. For purposes of applying this section to any amount includible in income by reason of section 593
(e), the preceding sentence shall be applied without regard to the phrase ‘10-year’.”
1997—Subsec. (d)(7). Pub. L. 105–34inserted at end “For purposes of applying this section to any amount includible in income by reason of section 593
1989—Subsec. (b)(3)(B). Pub. L. 101–239, § 7811(c)(8), inserted at end “A similar rule shall apply in the case of the minimum tax credit under section 53 to the extent attributable to taxable years for which the corporation was a C corporation.”
Subsec. (d)(2)(A)(i). Pub. L. 101–239, § 7811(c)(4), struck out “(except as provided in subsection (b)(2))” after “taxable year if”.
Subsec. (d)(5)(B). Pub. L. 101–239, § 7811(c)(5)(B)(i), inserted “(determined without regard to any carryover)” after “during the recognition period”.
Subsec. (d)(5)(C). Pub. L. 101–239, § 7811(c)(5)(B)(ii), substituted “which would be treated as recognized built-in gains or losses under this paragraph if such amounts were properly taken into account (or allowable as a deduction) during the recognition period” for “treated as recognized built-in gains or losses under this paragraph”.
1988—Subsec. (a). Pub. L. 100–647, § 1006(f)(1), inserted “net” before “recognized”.
Subsec. (b)(1). Pub. L. 100–647, § 1006(f)(2), added par. (1) and struck out former par. (1) which read as follows: “The tax imposed by subsection (a) shall be a tax computed by applying the highest rate of tax specified in section 11
(b) to the lesser of—
Subsec. (b)(2). Pub. L. 100–647, § 1006(f)(2), added par. (2) and struck out former par. (2) which read as follows: “Notwithstanding section 1371
(b)(1), any net operating loss carryforward arising in a taxable year for which the corporation was a C corporation shall be allowed as a deduction against the lesser of the amounts referred to in subparagraph (A) or (B) of paragraph (1). For purposes of determining the amount of any such loss which may be carried to subsequent taxable years, the lesser of the amounts referred to in subparagraph (A) or (B) of paragraph (1) shall be treated as taxable income.”
Subsec. (b)(4)(B). Pub. L. 100–647, § 1006(f)(3), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “the lower of the amounts specified in subparagraphs (A) and (B) of paragraph (1) shall be treated as the taxable income.”
Subsec. (c)(2). Pub. L. 100–647, § 1006(f)(4), substituted “net recognized built-in gain” for “recognized built-in gains” in introductory provisions and in subpar. (B).
Subsec. (d)(2) to (9). Pub. L. 100–647, § 1006(f)(5)(A), added pars. (2) to (9) and struck out former pars. (2), (3), and (4), which related to recognized built-in gain, recognition period, and taxable income, respectively.
Subsec. (e). Pub. L. 100–647, § 1006(f)(5)(A), added subsec. (e).
1986—Pub. L. 99–514amended section generally, substituting provisions imposing tax on certain built-in gains for provisions imposing tax on certain capital gains which had declared in: subsec. (a), general rule for capital gains tax on S corporations; subsec. (b), amount of tax; subsec. (c), general rule as to exceptions from subsec. (a) in par. (1), exception as to new corporations in par. (2), provisions relating to property with substituted basis in par. (3), and treatment of certain gains of options and commodities dealers in par. (4); and subsec. (d), determination of taxable income of corporation.
1984—Subsec. (b). Pub. L. 98–369, § 474(r)(27), substituted “section 34” for “section 39” in provisions following par. (2).
Subsec. (c)(2). Pub. L. 98–369, § 721(u), struck out “(and any predecessor corporation)” before “has been in existence” in subpar. (A), and inserted provision that to the extent provided in regulations, an S corporation and any predecessor corporation shall be treated as 1 corporation for purposes of this paragraph and paragraph (1).
Subsec. (c)(4). Pub. L. 98–369, § 102(d)(1), added par. (4).
1983—Subsec. (d). Pub. L. 97–448substituted “this section” for “subsections (a)(2) and (b)(2)”.
Pub. L. 112–240, title III, § 326(c),Jan. 2, 2013, 126 Stat. 2334, provided that: “The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2011.”
Pub. L. 111–240, title II, § 2014(b),Sept. 27, 2010, 124 Stat. 2556, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2010.”
Pub. L. 111–5, div. B, title I, § 1251(b),Feb. 17, 2009, 123 Stat. 342, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2008.”
Amendment by Pub. L. 99–514applicable to taxable years beginning after Dec. 31, 1986, but only in cases where the return for the taxable year is filed pursuant to an S election made after Dec. 31, 1986, and with provision that, in the case of any taxable year of an S corporation which begins after Dec. 31, 1986, and to which the amendments by section 632 (other than subsec. (b) thereof) of Pub. L. 99–514do not apply, subsec. (b)(1) of this section (as in effect on the date before Oct. 22, 1986) shall apply as if it read as follows: “an amount equal to 34 percent of the amount by which the net capital gain of the corporation for the taxable year exceeds $25,000, or”, and with other exceptions and special and transitional rules, see section 633 ofPub. L. 99–514, as amended, set out as an Effective Date note under section 336 of this title.
Amendment by section 102(d)(1) ofPub. L. 98–369applicable to positions established after July 18, 1984, in taxable years ending after that date, except as otherwise provided, see section 102(f), (g) ofPub. L. 98–369set out as a note under section 1256 of this title.
Amendment by section 474(r)(27) ofPub. L. 98–369applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) ofPub. L. 98–369, set out as a note under section 21 of this title.
Amendment by section 721(u) ofPub. L. 98–369effective as if included in the Subchapter S Revision Act of 1982, Pub. L. 97–354, see section 721(y)(1) ofPub. L. 98–369, set out as a note under section 1361 of this title.