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26 U.S.C. § 1363 — Effect of election on corporation
Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** Except as otherwise provided in this subchapter, an S corporation shall not be subject to the taxes imposed by this chapter.
**(b) Computation of corporation’s taxable income** The taxable income of an S corporation shall be computed in the same manner as in the case of an individual, except that—
(1) the items described in section 1366(a)(1)(A) shall be separately stated,
(2) the deductions referred to in section 703(a)(2) shall not be allowed to the corporation,
(3) section 248 shall apply, and
(4) section 291 shall apply if the S corporation (or any predecessor) was a C corporation for any of the 3 immediately preceding taxable years.
**(c) Elections of the S corporation**
(1) **In general** — Except as provided in paragraph (2), any election affecting the computation of items derived from an S corporation shall be made by the corporation.
(2) **Exceptions** — In the case of an S corporation, elections under the following provisions shall be made by each shareholder separately—
(A) section 617 (relating to deduction and recapture of certain mining exploration expenditures), and
(B) section 901 (relating to taxes of foreign countries and possessions of the United States).
**(d) Recapture of LIFO benefits**
(1) **In general** — If—
(A) an S corporation was a C corporation for the last taxable year before the first taxable year for which the election under section 1362(a) was effective, and
(B) the corporation inventoried goods under the LIFO method for such last taxable year,
the LIFO recapture amount shall be included in the gross income of the corporation for such last taxable year (and appropriate adjustments to the basis of inventory shall be made to take into account the amount included in gross income under this paragr
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Source location: Title 26, Chapter 1, § 1363; chapter-001-normal-taxes-and-surtaxes.md
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**(a) General rule** Except as otherwise provided in this subchapter, an S corporation shall not be subject to the taxes imposed by this chapter.
**(b) Computation of corporation’s taxable income** The taxable income of an S corporation shall be computed in the same manner as in the case of an individual, except that—
(1) the items described in section 1366(a)(1)(A) shall be separately stated,
(2) the deductions referred to in section 703(a)(2) shall not be allowed to the corporation,
(3) section 248 shall apply, and
(4) section 291 shall apply if the S corporation (or any predecessor) was a C corporation for any of the 3 immediately preceding taxable years.
**(c) Elections of the S corporation**
(1) **In general** — Except as provided in paragraph (2), any election affecting the computation of items derived from an S corporation shall be made by the corporation.
(2) **Exceptions** — In the case of an S corporation, elections under the following provisions shall be made by each shareholder separately—
(A) section 617 (relating to deduction and recapture of certain mining exploration expenditures), and
(B) section 901 (relating to taxes of foreign countries and possessions of the United States).
**(d) Recapture of LIFO benefits**
(1) **In general** — If—
(A) an S corporation was a C corporation for the last taxable year before the first taxable year for which the election under section 1362(a) was effective, and
(B) the corporation inventoried goods under the LIFO method for such last taxable year,
the LIFO recapture amount shall be included in the gross income of the corporation for such last taxable year (and appropriate adjustments to the basis of inventory shall be made to take into account the amount included in gross income under this paragraph).
(2) **Additional tax payable in installments**
(A) *In general* — Any increase in the tax imposed by this chapter by reason of this subsection shall be payable in 4 equal installments.
(B) *Date for payment of installments* — The first installment under subparagraph (A) shall be paid on or before the due date (determined without regard to extensions) for the return of the tax imposed by this chapter for the last taxable year for which the corporation was a C corporation and the 3 succeeding installments shall be paid on or before the due date (as so determined) for the corporation’s return for the 3 succeeding taxable years.
(C) *No interest for period of extension* — Notwithstanding section 6601(b), for purposes of section 6601, the date prescribed for the payment of each installment under this paragraph shall be determined under this paragraph.
(3) **LIFO recapture amount** — For purposes of this subsection, the term “LIFO recapture amount” means the amount (if any) by which—
(A) the inventory amount of the inventory asset under the first-in, first-out method authorized by section 471, exceeds
(B) the inventory amount of such assets under the LIFO method.
For purposes of the preceding sentence, inventory amounts shall be determined as of the close of the last taxable year referred to in paragraph (1).
(4) **Other definitions** — For purposes of this subsection—
(A) *LIFO method* — The term “LIFO method” means the method authorized by section 472.
(B) *Inventory assets* — The term “inventory assets” means stock in trade of the corporation, or other property of a kind which would properly be included in the inventory of the corporation if on hand at the close of the taxable year.
(C) *Method of determining inventory amount* — The inventory amount of assets under a method authorized by section 471 shall be determined—
(i) if the corporation uses the retail method of valuing inventories under section 472, by using such method, or
(ii) if clause (i) does not apply, by using cost or market, whichever is lower.
(D) *Not treated as member of affiliated group* — Except as provided in regulations, the corporation referred to in paragraph (1) shall not be treated as a member of an affiliated group with respect to the amount included in gross income under paragraph (1).
(5) **Special rule** — Sections 1367(a)(2)(D) and 1371(c)(1) shall not apply with respect to any increase in the tax imposed by reason of this subsection.
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Adjustments applicable to all taxpayers** In determining the amount of the alternative minimum taxable income for any taxable year the following treatment shall apply (in lieu of the treatment applicable for purposes of computing the regular tax):
(1) **Depreciation**
(A) *In general*
(i) *Property other than certain personal property* — Except as provided in clause (ii), the depreciation deduction allowable under section 167 with respect to any tangible property placed in service after December 31, 1986, shall be determined under the alternative system of section 168(g). In the case of property placed in service after December 31, 1998, the preceding sentence shall not apply but clause (ii) shall continue to apply.
(ii) *150-percent declining balance method for certain property* — The method of depreciation used shall be—
(I) the 150 percent declining balance method,
(II) switching to the straight line method for the 1st taxable year for which using the straight line method with respect to the adjusted basis as of the beginning of the year will yield a higher allowance.
The preceding sentence shall not apply to any section 1250 property (as defined in section 1250(c)) (and the straight line method shall be used for such section 1250 property) or to any other property if the depreciation deduction determined under section 168 with respect to such other property for purposes of the regular tax is determined by using the straight line method.
(B) *Exception for certain property* — This paragraph shall not apply to property described in paragraph (1), (2), (3), or (4) of section 168(f), or in section 168(e)(3)(C)(iv).
(C) *Coordination with transitional rules*
(i) *In general* — This paragraph shall not apply to property pla
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** There shall be allowed as a deduction all interest paid or accrued within the taxable year on indebtedness.
**(b) Installment purchases where interest charge is not separately stated**
(1) **General rule** — If personal property or educational services are purchased under a contract—
(A) which provides that payment of part or all of the purchase price is to be made in installments, and
(B) in which carrying charges are separately stated but the interest charge cannot be ascertained,
then the payments made during the taxable year under the contract shall be treated for purposes of this section as if they included interest equal to 6 percent of the average unpaid balance under the contract during the taxable year. For purposes of the preceding sentence, the average unpaid balance is the sum of the unpaid balance outstanding on the first day of each month beginning during the taxable year, divided by 12. For purposes of this paragraph, the term “educational services” means any service (including lodging) which is purchased from an educational organization described in section 170(b)(1)(A)(ii) and which is provided for a student of such organization.
(2) **Limitation** — In the case of any contract to which paragraph (1) applies, the amount treated as interest for any taxable year shall not exceed the aggregate carrying charges which are properly attributable to such taxable year.
**(c) Redeemable ground rents** For purposes of this subtitle, any annual or periodic rental under a redeemable ground rent (excluding amounts in redemption thereof) shall be treated as interest on an indebtedness secured by a mortgage.
**(d) Limitation on investment interest**
(1) **In general** — In the case of a taxpayer other than a corporation, the amount al
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Gross income from sources within United States** The following items of gross income shall be treated as income from sources within the United States:
(1) **Interest** — Interest from the United States or the District of Columbia, and interest on bonds, notes, or other interest-bearing obligations of noncorporate residents or domestic corporations not including—
(A) interest—
(i) on deposits with a foreign branch of a domestic corporation or a domestic partnership if such branch is engaged in the commercial banking business, and
(ii) on amounts satisfying the requirements of subparagraph (B) of section 871(i)(3) which are paid by a foreign branch of a domestic corporation or a domestic partnership, and
(B) in the case of a foreign partnership, which is predominantly engaged in the active conduct of a trade or business outside the United States, any interest not paid by a trade or business engaged in by the partnership in the United States and not allocable to income which is effectively connected (or treated as effectively connected) with the conduct of a trade or business in the United States.
(2) **Dividends** — The amount received as dividends—
(A) from a domestic corporation, or
(B) from a foreign corporation unless less than 25 percent of the gross income from all sources of such foreign corporation for the 3-year period ending with the close of its taxable year preceding the declaration of such dividends (or for such part of such period as the corporation has been in existence) was effectively connected (or treated as effectively connected other than income described in section 884(d)(2)) with the conduct of a trade or business within the United States; but only in an amount which bears the same ratio to such dividends as the gross in
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Married individuals filing joint returns and surviving spouses** There is hereby imposed on the taxable income of—
(1) every married individual (as defined in section 7703) who makes a single return jointly with his spouse under section 6013, and
(2) every surviving spouse (as defined in section 2(a)),
a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $36,90015% of taxable income. Over $36,900 but not over $89,150$5,535, plus 28% of the excess over $36,900. Over $89,150 but not over $140,000$20,165, plus 31% of the excess over $89,150. Over $140,000 but not over $250,000$35,928.50, plus 36% of the excess over $140,000. Over $250,000$75,528.50, plus 39.6% of the excess over $250,000.
**(b) Heads of households** There is hereby imposed on the taxable income of every head of a household (as defined in section 2(b)) a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $29,60015% of taxable income. Over $29,600 but not over $76,400$4,440, plus 28% of the excess over $29,600. Over $76,400 but not over $127,500$17,544, plus 31% of the excess over $76,400. Over $127,500 but not over $250,000$33,385, plus 36% of the excess over $127,500. Over $250,000$77,485, plus 39.6% of the excess over $250,000.
**(c) Unmarried individuals (other than surviving spouses and heads of households)** There is hereby imposed on the taxable income of every individual (other than a surviving spouse as defined in section 2(a) or the head of a household as defined in section 2(b)) who is not a married individual (as defined in section 7703) a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $22,10015% of taxable income. Over $22,100 but not over $53,50
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** For purposes of this subtitle, if a purchasing corporation makes an election under this section (or is treated under subsection (e) as having made such an election), then, in the case of any qualified stock purchase, the target corporation—
(1) shall be treated as having sold all of its assets at the close of the acquisition date at fair market value in a single transaction, and
(2) shall be treated as a new corporation which purchased all of the assets referred to in paragraph (1) as of the beginning of the day after the acquisition date.
**(b) Basis of assets after deemed purchase**
(1) **In general** — For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of—
(A) the grossed-up basis of the purchasing corporation’s recently purchased stock, and
(B) the basis of the purchasing corporation’s nonrecently purchased stock.
(2) **Adjustment for liabilities and other relevant items** — The amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items.
(3) **Election to step-up the basis of certain target stock**
(A) *In general* — Under regulations prescribed by the Secretary, the basis of the purchasing corporation’s nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B).
(B) *Determination of basis amount* — For purposes of subparagraph (A), the basis amount determined under this subparagraph shall be an amount equal to
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** Except as otherwise provided in this section or section 337, gain or loss shall be recognized to a liquidating corporation on the distribution of property in complete liquidation as if such property were sold to the distributee at its fair market value.
**(b) Treatment of liabilities** If any property distributed in the liquidation is subject to a liability or the shareholder assumes a liability of the liquidating corporation in connection with the distribution, for purposes of subsection (a) and section 337, the fair market value of such property shall be treated as not less than the amount of such liability.
**(c) Exception for liquidations which are part of a reorganization** For provision providing that this subpart does not apply to distributions in pursuance of a plan of reorganization, see section 361(c)(4).
**(d) Limitations on recognition of loss**
(1) **No loss recognized in certain distributions to related persons**
(A) *In general* — No loss shall be recognized to a liquidating corporation on the distribution of any property to a related person (within the meaning of section 267) if—
(i) such distribution is not pro rata, or
(ii) such property is disqualified property.
(B) *Disqualified property* — For purposes of subparagraph (A), the term “disqualified property” means any property which is acquired by the liquidating corporation in a transaction to which section 351 applied, or as a contribution to capital, during the 5-year period ending on the date of the distribution. Such term includes any property if the adjusted basis of such property is determined (in whole or in part) by reference to the adjusted basis of property described in the preceding sentence.
(2) **Special rule for certain property acquired in cert
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** There is hereby imposed (in addition to any other tax imposed by this subtitle) a tax equal to the excess (if any) of—
(1) the tentative minimum tax for the taxable year, over
(2) the regular tax for the taxable year plus, in the case of an applicable corporation, the tax imposed by section 59A.
**(b) Tentative minimum tax** For purposes of this part—
(1) **Noncorporate taxpayers** — In the case of a taxpayer other than a corporation—
(A) *In general* — The tentative minimum tax for the taxable year is the sum of—
(i) 26 percent of so much of the taxable excess as does not exceed $175,000, plus
(ii) 28 percent of so much of the taxable excess as exceeds $175,000.
The amount determined under the preceding sentence shall be reduced by the alternative minimum tax foreign tax credit for the taxable year.
(B) *Taxable excess* — For purposes of this subsection, the term “taxable excess” means so much of the alternative minimum taxable income for the taxable year as exceeds the exemption amount.
(C) *Married individual filing separate return* — In the case of a married individual filing a separate return, subparagraph (A) shall be applied by substituting 50 percent of the dollar amount otherwise applicable under clause (i) and clause (ii) thereof. For purposes of the preceding sentence, marital status shall be determined under section 7703.
(D) *Alternative minimum taxable income* — The term “alternative minimum taxable income” means the taxable income of the taxpayer for the taxable year—
(i) determined with the adjustments provided in section 56 and section 58, and
(ii) increased by the amount of the items of tax preference described in section 57.
If a taxpayer is subject to the regular tax, such taxpayer shal
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Federal law — U.S. Code and appendices · legal_authorities
**(a) S corporation defined**
(1) **In general** — For purposes of this title, the term “S corporation” means, with respect to any taxable year, a small business corporation for which an election under section 1362(a) is in effect for such year.
(2) **C corporation** — For purposes of this title, the term “C corporation” means, with respect to any taxable year, a corporation which is not an S corporation for such year.
**(b) Small business corporation**
(1) **In general** — For purposes of this subchapter, the term “small business corporation” means a domestic corporation which is not an ineligible corporation and which does not—
(A) have more than 100 shareholders,
(B) have as a shareholder a person (other than an estate, a trust described in subsection (c)(2), or an organization described in subsection (c)(6)) who is not an individual,
(C) have a nonresident alien as a shareholder, and
(D) have more than 1 class of stock.
(2) **Ineligible corporation defined** — For purposes of paragraph (1), the term “ineligible corporation” means any corporation which is—
(A) a financial institution which uses the reserve method of accounting for bad debts described in section 585,
(B) an insurance company subject to tax under subchapter L, or
(C) a DISC or former DISC.
(3) **Treatment of certain wholly owned subsidiaries**
(A) *In general* — Except as provided in regulations prescribed by the Secretary, for purposes of this title—
(i) a corporation which is a qualified subchapter S subsidiary shall not be treated as a separate corporation, and
(ii) all assets, liabilities, and items of income, deduction, and credit of a qualified subchapter S subsidiary shall be treated as assets, liabilities, and such items (as the case may be) of the S corp
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Federal law — U.S. Code and appendices · legal_authorities
Page 2452
TITLE 26—INTERNAL REVENUE CODE
§ 1363
then such dealer shall be treated as having received ap-
proval for and adopted a taxable year beginning on the
first day during 1984 on which it was a small business
corporation (as so defined) or such other day as may be
permitted under regulations and ending on the date de-
termined under section 1378 of such Code and such elec-
tion shall be effective for such taxable year.’’
§ 1363. Effect of election on corporation
(a) General rule
Except as otherwise provided in this sub-
chapter, an S corporation shall not be subject to
the taxes imposed by this chapter.
(b) Computation of corporation’s taxable income
The taxable income of an S corporation shall
be computed in the same manner as in the case
of an individual, except that—
(1)
the
items
described
in
section
1366(a)(1)(A) shall be separately stated,
(2) the deductions referred to in section
703(a)(2) shall not be allowed to the corpora-
tion,
(3) section 248 shall apply, and
(4) section 291 shall apply if the S corpora-
tion (or any predecessor) was a C corporation
for any of the 3 immediately preceding taxable
years.
(c) Elections of the S corporation
(1) In general
Except as provided in paragraph (2), any
election affecting the computation of items
derived from an S corporation shall be made
by the corporation.
(2) Exceptions
In the case of an S corporation, elections
under the following provisions shall be made
by each shareholder separately—
(A) section 617 (relating to deduction and
recapture of certain mining exploration ex-
penditures), and
(B) section 901 (relating to taxes of foreign
countries and possessions of the United
States).
(d) Recapture of LIFO benefits
(1) In general
If—
(A) an S corporation was a C corporation
Source: Supplied 2024 U.S. Code historical extraction · 26 U.S.C. § 1363
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