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26 U.S.C. § 641 — Imposition of tax
Federal law — U.S. Code and appendices · legal_authorities
**(a) Application of tax** The tax imposed by section 1(e) shall apply to the taxable income of estates or of any kind of property held in trust, including—
(1) income accumulated in trust for the benefit of unborn or unascertained persons or persons with contingent interests, and income accumulated or held for future distribution under the terms of the will or trust;
(2) income which is to be distributed currently by the fiduciary to the beneficiaries, and income collected by a guardian of an infant which is to be held or distributed as the court may direct;
(3) income received by estates of deceased persons during the period of administration or settlement of the estate; and
(4) income which, in the discretion of the fiduciary, may be either distributed to the beneficiaries or accumulated.
**(b) Computation and payment** The taxable income of an estate or trust shall be computed in the same manner as in the case of an individual, except as otherwise provided in this part. The tax shall be computed on such taxable income and shall be paid by the fiduciary. For purposes of this subsection, a foreign trust or foreign estate shall be treated as a nonresident alien individual who is not present in the United States at any time.
**(c) Special rules for taxation of electing small business trusts**
(1) **In general** — For purposes of this chapter—
(A) the portion of any electing small business trust which consists of stock in 1 or more S corporations shall be treated as a separate trust, and
(B) the amount of the tax imposed by this chapter on such separate trust shall be determined with the modifications of paragraph (2).
(2) **Modifications** — For purposes of paragraph (1), the modifications of this paragraph are the following:
(A) Except as provided in s
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Source file: Laws/federal/codes/united-states-code/title-26/section-641-imposition-of-tax--ba16b46820.md
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Source location: Title 26, Chapter 1, § 641; chapter-001-normal-taxes-and-surtaxes.md
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**(a) Application of tax** The tax imposed by section 1(e) shall apply to the taxable income of estates or of any kind of property held in trust, including—
(1) income accumulated in trust for the benefit of unborn or unascertained persons or persons with contingent interests, and income accumulated or held for future distribution under the terms of the will or trust;
(2) income which is to be distributed currently by the fiduciary to the beneficiaries, and income collected by a guardian of an infant which is to be held or distributed as the court may direct;
(3) income received by estates of deceased persons during the period of administration or settlement of the estate; and
(4) income which, in the discretion of the fiduciary, may be either distributed to the beneficiaries or accumulated.
**(b) Computation and payment** The taxable income of an estate or trust shall be computed in the same manner as in the case of an individual, except as otherwise provided in this part. The tax shall be computed on such taxable income and shall be paid by the fiduciary. For purposes of this subsection, a foreign trust or foreign estate shall be treated as a nonresident alien individual who is not present in the United States at any time.
**(c) Special rules for taxation of electing small business trusts**
(1) **In general** — For purposes of this chapter—
(A) the portion of any electing small business trust which consists of stock in 1 or more S corporations shall be treated as a separate trust, and
(B) the amount of the tax imposed by this chapter on such separate trust shall be determined with the modifications of paragraph (2).
(2) **Modifications** — For purposes of paragraph (1), the modifications of this paragraph are the following:
(A) Except as provided in section 1(h), the amount of the tax imposed by section 1(e) shall be determined by using the highest rate of tax set forth in section 1(e).
(B) The exemption amount under section 55(d) shall be zero.
(C) The only items of income, loss, deduction, or credit to be taken into account are the following:
(i) The items required to be taken into account under section 1366.
(ii) Any gain or loss from the disposition of stock in an S corporation.
(iii) To the extent provided in regulations, State or local income taxes or administrative expenses to the extent allocable to items described in clauses (i) and (ii).
(iv) Any interest expense paid or accrued on indebtedness incurred to acquire stock in an S corporation.
No deduction or credit shall be allowed for any amount not described in this paragraph, and no item described in this paragraph shall be apportioned to any beneficiary.
(D) No amount shall be allowed under paragraph (1) or (2) of section 1211(b).
(E)
(i) Section 642(c) shall not apply.
(ii) For purposes of section 170(b)(1)(G), adjusted gross income shall be computed in the same manner as in the case of an individual, except that the deductions for costs which are paid or incurred in connection with the administration of the trust and which would not have been incurred if the property were not held in such trust shall be treated as allowable in arriving at adjusted gross income.
(3) **Treatment of remainder of trust and distributions** — For purposes of determining—
(A) the amount of the tax imposed by this chapter on the portion of any electing small business trust not treated as a separate trust under paragraph (1), and
(B) the distributable net income of the entire trust,
the items referred to in paragraph (2)(C) shall be excluded. Except as provided in the preceding sentence, this subsection shall not affect the taxation of any distribution from the trust.
(4) **Treatment of unused deductions where termination of separate trust** — If a portion of an electing small business trust ceases to be treated as a separate trust under paragraph (1), any carryover or excess deduction of the separate trust which is referred to in section 642(h) shall be taken into account by the entire trust.
(5) **Electing small business trust** — For purposes of this subsection, the term “electing small business trust” has the meaning given such term by section 1361(e)(1).
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Allowance of credit**
(1) **In general** — In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter the amount of the qualified adoption expenses paid or incurred by the taxpayer.
(2) **Year credit allowed** — The credit under paragraph (1) with respect to any expense shall be allowed—
(A) in the case of any expense paid or incurred before the taxable year in which such adoption becomes final, for the taxable year following the taxable year during which such expense is paid or incurred, and
(B) in the case of an expense paid or incurred during or after the taxable year in which such adoption becomes final, for the taxable year in which such expense is paid or incurred.
(3) **$10,000 credit for adoption of child with special needs regardless of expenses** — In the case of an adoption of a child with special needs which becomes final during a taxable year, the taxpayer shall be treated as having paid during such year qualified adoption expenses with respect to such adoption in an amount equal to the excess (if any) of $10,000 over the aggregate qualified adoption expenses actually paid or incurred by the taxpayer with respect to such adoption during such taxable year and all prior taxable years.
(4) **Portion of credit refundable** — So much of the credit allowed under paragraph (1) as does not exceed $5,000 shall be treated as a credit allowed under subpart C and not as a credit allowed under this subpart.
**(b) Limitations**
(1) **Dollar limitation** — The aggregate amount of qualified adoption expenses which may be taken into account under subsection (a) for all taxable years with respect to the adoption of a child by the taxpayer shall not exceed $10,000.
(2) **Income limitation**
(A) *In general* —
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 23
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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** The total of the amounts which are treated under section 666 as having been distributed by a trust in a preceding taxable year shall be included in the income of a beneficiary of the trust when paid, credited, or required to be distributed to the extent that such total would have been included in the income of such beneficiary under section 662(a)(2) (and, with respect to any tax-exempt interest to which section 103 applies, under section 662(b)) if such total had been paid to such beneficiary on the last day of such preceding taxable year. The tax imposed by this subtitle on a beneficiary for a taxable year in which any such amount is included in his income shall be determined only as provided in this section and shall consist of the sum of—
(1) a partial tax computed on the taxable income reduced by an amount equal to the total of such amounts, at the rate and in the manner as if this section had not been enacted,
(2) a partial tax determined as provided in subsection (b) of this section, and
(3) in the case of a foreign trust, the interest charge determined as provided in section 668.
**(b) Tax on distribution**
(1) **In general** — The partial tax imposed by subsection (a)(2) shall be determined.
(A) by determining the number of preceding taxable years of the trust on the last day of which an amount is deemed under section 666(a) to have been distributed,
(B) by taking from the 5 taxable years immediately preceding the year of the accumulation distribution the 1 taxable year for which the beneficiary’s taxable income was the highest and the 1 taxable year for which his taxable income was the lowest,
(C) by adding to the beneficiary’s taxable income for each of the 3 taxable years remaining after the application of subparagraph (B)
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Nonrecognition of gain** If—
(1) the taxpayer or executor elects in such form as the Secretary may prescribe the application of this section with respect to any sale of qualified securities,
(2) the taxpayer purchases qualified replacement property within the replacement period, and
(3) the requirements of subsection (b) are met with respect to such sale,
then the gain (if any) on such sale which would be recognized as long-term capital gain shall be recognized only to the extent that the amount realized on such sale exceeds the cost to the taxpayer of such qualified replacement property.
**(b) Requirements to qualify for nonrecognition** A sale of qualified securities meets the requirements of this subsection if—
(1) **Sale to employee organizations** — The qualified securities are sold to—
(A) an employee stock ownership plan (as defined in section 4975(e)(7)), or
(B) an eligible worker-owned cooperative.
(2) **Plan must hold 30 percent of stock after sale** — The plan or cooperative referred to in paragraph (1) owns (after application of section 318(a)(4)), immediately after the sale, at least 30 percent of—
(A) each class of outstanding stock of the corporation (other than stock described in section 1504(a)(4)) which issued the qualified securities, or
(B) the total value of all outstanding stock of the corporation (other than stock described in section 1504(a)(4)).
(3) **Written statement required**
(A) *In general* — The taxpayer files with the Secretary the written statement described in subparagraph (B).
(B) *Statement* — A statement is described in this subparagraph if it is a verified written statement of—
(i) the employer whose employees are covered by the plan described in paragraph (1), or
(ii) any authorized officer
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1042
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General** Any lot or parcel which is part of a tract of real property in the hands of a taxpayer other than a C corporation shall not be deemed to be held primarily for sale to customers in the ordinary course of trade or business at the time of sale solely because of the taxpayer having subdivided such tract for purposes of sale or because of any activity incident to such subdivision or sale, if—
(1) such tract, or any lot or parcel thereof, had not previously been held by such taxpayer primarily for sale to customers in the ordinary course of trade or business (unless such tract at such previous time would have been covered by this section) and, in the same taxable year in which the sale occurs, such taxpayer does not so hold any other real property; and
(2) no substantial improvement that substantially enhances the value of the lot or parcel sold is made by the taxpayer on such tract while held by the taxpayer or is made pursuant to a contract of sale entered into between the taxpayer and the buyer. For purposes of this paragraph, an improvement shall be deemed to be made by the taxpayer if such improvement was made by—
(A) the taxpayer or members of his family (as defined in section 267(c)(4)), by a corporation controlled by the taxpayer, an S corporation which included the taxpayer as a shareholder, or by a partnership which included the taxpayer as a partner; or
(B) a lessee, but only if the improvement constitutes income to the taxpayer; or
(C) Federal, State, or local government, or political subdivision thereof, but only if the improvement constitutes an addition to basis for the taxpayer; and
(3) such lot or parcel, except in the case of real property acquired by inheritance or devise, is held by the taxpayer for a period of 5 years.
**(b) S
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1237
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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
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1361
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Election**
(1) **In general** — Except as provided in subsection (g), a small business corporation may elect, in accordance with the provisions of this section, to be an S corporation.
(2) **All shareholders must consent to election** — An election under this subsection shall be valid only if all persons who are shareholders in such corporation on the day on which such election is made consent to such election.
**(b) When made**
(1) **In general** — An election under subsection (a) may be made by a small business corporation for any taxable year—
(A) at any time during the preceding taxable year, or
(B) at any time during the taxable year and on or before the 15th day of the 3d month of the taxable year.
(2) **Certain elections made during 1st 2½ months treated as made for next taxable year** — If—
(A) an election under subsection (a) is made for any taxable year during such year and on or before the 15th day of the 3d month of such year, but
(B) either—
(i) on 1 or more days in such taxable year before the day on which the election was made the corporation did not meet the requirements of subsection (b) of section 1361, or
(ii) 1 or more of the persons who held stock in the corporation during such taxable year and before the election was made did not consent to the election,
(3) **Election made after 1st 2½ months treated as made for following taxable year** — If—
(A) a small business corporation makes an election under subsection (a) for any taxable year, and
(B) such election is made after the 15th day of the 3d month of the taxable year and on or before the 15th day of the 3rd month of the following taxable year,
then such election shall be treated as made for the following taxable year.
(4) **Taxable years of 2½ months or
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1362
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Determination of shareholder’s tax liability**
(1) **In general** — In determining the tax under this chapter of a shareholder for the shareholder’s taxable year in which the taxable year of the S corporation ends (or for the final taxable year of a shareholder who dies, or of a trust or estate which terminates, before the end of the corporation’s taxable year), there shall be taken into account the shareholder’s pro rata share of the corporation’s—
(A) items of income (including tax-exempt income), loss, deduction, or credit the separate treatment of which could affect the liability for tax of any shareholder, and
(B) nonseparately computed income or loss.
For purposes of the preceding sentence, the items referred to in subparagraph (A) shall include amounts described in paragraph (4) or (6) of section 702(a).
(2) **Nonseparately computed income or loss defined** — For purposes of this subchapter, the term “nonseparately computed income or loss” means gross income minus the deductions allowed to the corporation under this chapter, determined by excluding all items described in paragraph (1)(A).
**(b) Character passed thru** The character of any item included in a shareholder’s pro rata share under paragraph (1) of subsection (a) shall be determined as if such item were realized directly from the source from which realized by the corporation, or incurred in the same manner as incurred by the corporation.
**(c) Gross income of a shareholder** In any case where it is necessary to determine the gross income of a shareholder for purposes of this title, such gross income shall include the shareholder’s pro rata share of the gross income of the corporation.
**(d) Special rules for losses and deductions**
(1) **Cannot exceed shareholder’s basis in stock and
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1366
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** A distribution of property made by an S corporation with respect to its stock to which (but for this subsection) section 301(c) would apply shall be treated in the manner provided in subsection (b) or (c), whichever applies.
**(b) S corporation having no earnings and profits** In the case of a distribution described in subsection (a) by an S corporation which has no accumulated earnings and profits—
(1) **Amount applied against basis** — The distribution shall not be included in gross income to the extent that it does not exceed the adjusted basis of the stock.
(2) **Amount in excess of basis** — If the amount of the distribution exceeds the adjusted basis of the stock, such excess shall be treated as gain from the sale or exchange of property.
**(c) S corporation having earnings and profits** In the case of a distribution described in subsection (a) by an S corporation which has accumulated earnings and profits—
(1) **Accumulated adjustments account** — That portion of the distribution which does not exceed the accumulated adjustments account shall be treated in the manner provided by subsection (b).
(2) **Dividend** — That portion of the distribution which remains after the application of paragraph (1) shall be treated as a dividend to the extent it does not exceed the accumulated earnings and profits of the S corporation.
(3) **Treatment of remainder** — Any portion of the distribution remaining after the application of paragraph (2) of this subsection shall be treated in the manner provided by subsection (b).
Except to the extent provided in regulations, if the distributions during the taxable year exceed the amount in the accumulated adjustments account at the close of the taxable year, for purposes of this subsection, the balance of suc
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1368
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Application of subchapter C rules** 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.
**(b) No carryover between C year and S year**
(1) **From C year to S year** — 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.
(2) **No carryover from S year** — No carryforward, and no carryback, shall arise at the corporate level for a taxable year for which a corporation is an S corporation.
(3) **Treatment of S year as elapsed year** — Nothing in paragraphs (1) and (2) shall prevent treating a taxable year for which a corporation is an S corporation as a taxable year for purposes of determining the number of taxable years to which an item may be carried back or carried forward.
**(c) Earnings and profits**
(1) **In general** — 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.
(2) **Adjustments for redemptions, liquidations, reorganizations, divisives, etc.** — 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.
(3) **Adjustments in case of distributions treated as dividends under section 1368(c)(2)** — Paragraph (1) shall not apply with respect to that portion of a distribution which is treated as a dividend under section 1368(c)(2).
**(d) Coordination with investment credit recapture**
(1) **No recapture by reason of election** — Any election under section 1362 shall be treated as a me
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1371
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