26 U.S.C. § 443 — Returns for a period of less than 12 months

Page 1549 TITLE 26—INTERNAL REVENUE CODE § 443 1986—Subsec. (f)(2)(B)(iii). Pub. L. 99–514, § 104(b)(6), struck out ‘‘and by adding the zero bracket amount,’’ after ‘‘in the short period,’’. Subsec. (f)(3), (4). Pub. L. 99–514, § 806(d), added par. (3) and redesignated former par. (3) as (4). Subsec. (i). Pub. L. 99–514, § 806(c)(1), added subsec. (i). 1984—Subsec. (b)(4). Pub. L. 98–369, § 803(a), added par. (4). Subsec. (f)(2)(A). Pub. L. 98–369, § 474(b)(2), substituted ‘‘section 15’’ for ‘‘section 21’’ in provisions preceding cl. (i). Subsec. (h). Pub. L. 98–369, § 803(b), added subsec. (h). 1977—Subsec. (f)(2)(B)(iii). Pub. L. 95–30 substituted ‘‘multiplying the gross income for such short period (minus the deductions allowed by this chapter for the short period, but only the adjusted amount of the de- ductions for personal exemptions as described in sec- tion 443(c)) by 365, by dividing the result by the number of days in the short period, and by adding the zero bracket amount’’ for ‘‘multiplying such income by 365 and dividing the result by the number of days in the short period’’. 1976—Subsec. (f)(3). Pub. L. 94–455 struck out ‘‘or his delegate’’ after ‘‘Secretary’’. 1964—Subsec. (f)(2)(A). Pub. L. 88–272 inserted ‘‘, including,’’ before ‘‘or ending with reference to’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 104(b)(6) of Pub. L. 99–514 ap- plicable to taxable years beginning after Dec. 31, 1986, see section 151(a) of Pub. L. 99–514, set out as a note under section 1 of this title. Amendment by section 806(c)(1), (d) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, with special provisions applicable to taxpayers who are required to change their accounting periods, see section 806(e) of Pub. L. 99–514, set out as a note under section 1378 of this title. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by section 474(b)(2) of Pub. L. 98–369 ap- plicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of Pub. L. 98–369, set out as a note under section 21 of this title. Amendment by section 803 of Pub. L. 98–369 applicable to taxable years beginning after Dec. 31, 1984, see sec- tion 805(a)(4) of Pub. L. 98–369, as amended, set out as a note under section 245 of this title. EFFECTIVE DATE OF 1977 AMENDMENT Amendment by Pub. L. 95–30 applicable to taxable years beginning after Dec. 31, 1976, see section 106(a) of Pub. L. 95–30, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1964 AMENDMENT Amendment by Pub. L. 88–272 applicable to taxable years ending after Dec. 31, 1963, see section 235(d) of Pub. L. 88–272, set out as a note under section 269 of this title. CONSTRUCTION OF SECTION 806 OF PUB. L. 99–514 Nothing in section 806 of Pub. L. 99–514 or in any leg- islative history relating thereto to be construed as re- quiring the Secretary of the Treasury or his delegate to permit an automatic change of a taxable year, see sec- tion 1008(e)(9) of Pub. L. 100–647, set out as a note under section 1378 of this title. § 442. Change of annual accounting period If a taxpayer changes his annual accounting period, the new accounting period shall become the taxpayer’s taxable year only if the change is approved by the Secretary. For purposes of this subtitle, if a taxpayer to whom section 441(g) ap- plies adopts an annual accounting period (as de- fined in section 441(c)) other than a calendar year, the taxpayer shall be treated as having changed his annual accounting period. (Aug. 16, 1954, ch. 736, 68A Stat. 149; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.) Editorial Notes AMENDMENTS 1976—Pub. L. 94–455 struck out ‘‘or his delegate’’ after ‘‘Secretary’’. § 443. Returns for a period of less than 12 months (a) Returns for short period A return for a period of less than 12 months (referred to in this section as ‘‘short period’’) shall be made under any of the following cir- cumstances: (1) Change of annual accounting period When the taxpayer, with the approval of the Secretary, changes his annual accounting pe- riod. In such a case, the return shall be made for the short period beginning on the day after the close of the former taxable year and end- ing at the close of the day before the day des- ignated as the first day of the new taxable year. (2) Taxpayer not in existence for entire taxable year When the taxpayer is in existence during only part of what would otherwise be his tax- able year. (b) Computation of tax on change of annual ac- counting period (1) General rule If a return is made under paragraph (1) of subsection (a), the taxable income for the short period shall be placed on an annual basis by multiplying the modified taxable income for such short period by 12, dividing the result by the number of months in the short period. The tax shall be the same part of the tax com- puted on the annual basis as the number of months in the short period is of 12 months. (2) Exception (A) Computation based on 12-month period If the taxpayer applies for the benefits of this paragraph and establishes the amount of this taxable income for the 12-month pe- riod described in subparagraph (B), com- puted as if that period were a taxable year and under the law applicable to that year, then the tax for the short period, computed under paragraph (1), shall be reduced to the greater of the following: (i) an amount which bears the same ratio to the tax computed on the taxable income for the 12-month period as the modified Page 1550 TITLE 26—INTERNAL REVENUE CODE § 443 taxable income computed on the basis of the short period bears to the modified tax- able income for the 12-month period; or (ii) the tax computed on the modified taxable income for the short period. The taxpayer (other than a taxpayer to whom subparagraph (B)(ii) applies) shall compute the tax and file his return without the application of this paragraph. (B) 12-month period The 12-month period referred to in sub- paragraph (A) shall be— (i) the period of 12 months beginning on the first day of the short period, or (ii) the period of 12 months ending at the close of the last day of the short period, if at the end of the 12 months referred to in clause (i) the taxpayer is not in existence or (if a corporation) has theretofore dis- posed of substantially all of its assets. (C) Application for benefits Application for the benefits of this para- graph shall be made in such manner and at such time as the regulations prescribed under subparagraph (D) may require; except that the time so prescribed shall not be later than the time (including extensions) for fil- ing the return for the first taxable year which ends on or after the day which is 12 months after the first day of the short pe- riod. Such application, in case the return was filed without regard to this paragraph, shall be considered a claim for credit or re- fund with respect to the amount by which the tax is reduced under this paragraph. (D) Regulations The Secretary shall prescribe such regula- tions as he deems necessary for the applica- tion of this paragraph. (3) Modified taxable income defined For purposes of this subsection the term ‘‘modified taxable income’’ means, with re- spect to any period, the gross income for such period minus the deductions allowed by this chapter for such period (but, in the case of a short period, only the adjusted amount of the deductions for personal exemptions). (c) Adjustment in deduction for personal exemp- tion In the case of a taxpayer other than a corpora- tion, if a return is made for a short period by reason of subsection (a)(1) and if the tax is not computed under subsection (b)(2), then the ex- emptions allowed as a deduction under section 151 (and any deduction in lieu thereof) shall be reduced to amounts which bear the same ratio to the full exemptions as the number of months in the short period bears to 12. (d) Adjustment in computing minimum tax and tax preferences If a return is made for a short period by reason of subsection (a)— (1) the alternative minimum taxable income for the short period shall be placed on an an- nual basis by multiplying such amount by 12 and dividing the result by the number of months in the short period, and (2) the amount computed under paragraph (1) of section 55(a) shall bear the same relation to the tax computed on the annual basis as the number of months in the short period bears to 12. (e) Cross references For inapplicability of subsection (b) in computing— (1) Accumulated earnings tax, see section 536. (2) Personal holding company tax, see section 546. (3) The taxable income of a regulated investment company, see section 852(b)(2)(E). (4) The taxable income of a real estate investment trust, see section 857(b)(2)(C). For returns for a period of less than 12 months in the case of a debtor’s election to terminate a taxable year, see section 1398(d)(2)(E). (Aug. 16, 1954, ch. 736, 68A Stat. 149; Pub. L. 86–779, § 10(i), Sept. 14, 1960, 74 Stat. 1009; Pub. L. 91–172, title III, § 301(b)(6), Dec. 30, 1969, 83 Stat. 585; Pub. L. 94–455, title III, § 301(e), title XII, § 1204(c)(2), title XVI, § 1607(b)(1)(C), title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1553, 1697, 1757, 1834; Pub. L. 95–30, title I, § 102(b)(6), May 23, 1977, 91 Stat. 137; Pub. L. 95–600, title IV, § 421(e)(2), title VII, § 703(o)(1)–(3), Nov. 6, 1978, 92 Stat. 2876, 2943; Pub. L. 96–222, title I, § 104(a)(4)(H)(iii), Apr. 1, 1980, 94 Stat. 217; Pub. L. 96–589, § 3(d), Dec. 24, 1980, 94 Stat. 3401; Pub. L. 97–448, title III, § 304(a), Jan. 12, 1983, 96 Stat. 2398; Pub. L. 99–514, title I, § 104(b)(7), title VII, § 701(e)(3), Oct. 22, 1986, 100 Stat. 2105, 2342; Pub. L. 108–357, title IV, § 413(c)(6), Oct. 22, 2004, 118 Stat. 1507.) Editorial Notes AMENDMENTS 2004—Subsec. (e)(3) to (5). Pub. L. 108–357 redesignated pars. (4) and (5) as (3) and (4), respectively, and struck out former par. (3) which read as follows: ‘‘Undistrib- uted foreign personal holding company income, see sec- tion 557.’’ 1986—Subsec. (b)(1). Pub. L. 99–514, § 104(b)(7)(A), struck out ‘‘, and adding the zero bracket amount’’ after ‘‘by the number of months in the short period’’. Subsec. (b)(2)(A)(ii). Pub. L. 99–514, § 104(b)(7)(B), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: ‘‘the tax computed on the sum of the modified taxable income for the short period plus the zero bracket amount.’’ Subsec. (d). Pub. L. 99–514, § 701(e)(3), substituted ‘‘and tax preferences’’ for ‘‘for tax preferences’’ in heading and amended text generally. Prior to amendment, sub- sec. (d) read as follows: ‘‘If a return is made for a short period by reason of subsection (a), then— ‘‘(1) in the case of a taxpayer other than a corpora- tion, the alternative minimum taxable income for the short period shall be placed on an annual basis by multiplying that amount by 12 and dividing the re- sult by the number of months in the short period, and the amount computed under paragraph (1) of section 55(a) shall be the same part of the tax computed on the annual basis as the number of months in the short period is of 12 months; and ‘‘(2) the $10,000 amount specified in section 56 (relat- ing to minimum tax for tax preferences), modified as provided by section 58, shall be reduced to the amount which bears the same ratio to such specified amount as the number of days in the short period bears to 365.’’ 1983—Subsec. (e). Pub. L. 97–448 substituted ‘‘section 1398(d)(2)(E)’’ for ‘‘section 1398(d)(3)(E)’’. 1980—Subsec. (d)(2). Pub. L. 96–222 struck out ‘‘in the case of a corporation,’’ before ‘‘the $10,000 amount’’. Subsec. (e). Pub. L. 96–589 inserted cross reference to section 1398(d)(3)(E) for returns for a period of less than Page 1551 TITLE 26—INTERNAL REVENUE CODE § 444 12 months in the case of a debtor’s election to termi- nate a taxable year. 1978—Subsec. (b)(1). Pub. L. 95–600, § 703(o)(2), sub- stituted ‘‘modified taxable income for such short pe- riod’’ for ‘‘gross income for such short period (minus the deductions allowed by this chapter for the short pe- riod, but only the adjusted amount of the deductions for personal exemptions)’’. Subsec. (b)(2). Pub. L. 95–600, § 703(o)(1), substituted in cl. (i) ‘‘modified taxable income’’ for ‘‘taxable income’’ in two places and in cl. (ii) ‘‘the sum of the modified taxable income’’ for ‘‘the taxable income’’ and ‘‘plus the zero bracket amount’’ for ‘‘without placing the tax- able income on an annual basis’’. Subsec. (b)(3). Pub. L. 95–600, § 703(o)(3), added par. (3). Subsec. (d). Pub. L. 95–600, § 421(e)(2), substituted ‘‘Ad- justment in computing minimum tax for tax pref- erences’’ for ‘‘Adjustment in exclusion for computing minimum tax for tax preferences’’ in heading, redesig- nated existing provisions as par. (2) and as so redesig- nated applied par. (2) to corporations, and added par. (1). 1977—Subsec. (b)(1). Pub. L. 95–30 substituted ‘‘multi- plying the gross income for such short period (minus the deductions allowed by this chapter for the short pe- riod, but only the adjusted amount of the deductions for personal exemptions) by 12, dividing the result by the number of months in the short period, and adding the zero bracket amount’’ for ‘‘multiplying such in- come by 12, and dividing the result by the number of months in the short period’’. 1976—Subsec. (a)(1). Pub. L. 94–455, § 1906(b)(13)(A), struck out ‘‘or his delegate’’ after ‘‘Secretary’’. Subsec. (a)(3). Pub. L. 94–455, § 1204(c)(2), struck out par. (3) which made termination of taxpayer’s taxable year under section 6851 as one of the circumstances under which a tax return for a period of less than 12 months shall be made. Subsec. (b)(2)(D). Pub. L. 94–455, § 1906(b)(13)(A), struck out ‘‘or his delegate’’ after ‘‘Secretary’’. Subsec. (d). Pub. L. 94–455, § 301(e), substituted ‘‘$10,000’’ for ‘‘$30,000’’. Subsec. (e)(5). Pub. L. 94–455, § 1607(b)(1)(C), sub- stituted ‘‘section 857(b)(2)(C)’’ for ‘‘section 857(b)(2)(D)’’. 1969—Subsecs. (d), (e). Pub. L. 91–172 added subsec. (d) and redesignated former subsec. (d) as (e). 1960—Subsec. (d)(5). Pub. L. 86–779 added par. (5). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2004 AMENDMENT Amendment by Pub. L. 108–357 applicable to taxable years of foreign corporations beginning after Dec. 31, 2004, and to taxable years of United States shareholders with or within which such taxable years of foreign cor- porations end, see section 413(d)(1) of Pub. L. 108–357, set out as an Effective and Termination Dates of 2004 Amendments note under section 1 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 104(b)(7) of Pub. L. 99–514 ap- plicable to taxable years beginning after Dec. 31, 1986, see section 151(a) of Pub. L. 99–514, set out as a note under section 1 of this title. Amendment by section 701(e)(3) of Pub. L. 99–514 ap- plicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 701(f) of Pub. L. 99–514, set out as an Effective Date note under section 55 of this title. EFFECTIVE DATE OF 1983 AMENDMENT Pub. L. 97–448, title III, § 311(b)(1), Jan. 12, 1983, 96 Stat. 2411, provided that: ‘‘The amendment made by subsection (a) of section 304 [amending this section] shall take effect as if included in the amendments made by section 3 of the Bankruptcy Tax Act of 1980 [section 3 of Pub. L. 96–589, which amended this section and sections 6012 and 6103 of this title].’’ EFFECTIVE DATE OF 1980 AMENDMENT Amendment by Pub. L. 96–589 applicable to bank- ruptcy cases commencing more than 90 days after Dec. 24, 1980, see section 7(b) of Pub. L. 96–589, set out as a note under section 108 of this title. Amendment by Pub. L. 96–222 effective, except as oth- erwise provided, as if it had been included in the provi- sions of the Revenue Act of 1978, Pub. L. 95–600, to which such amendment relates, see section 201 of Pub. L. 96–222, set out as a note under section 32 of this title. EFFECTIVE DATE OF 1978 AMENDMENT Pub. L. 95–600, title VII, § 703(o)(4), Nov. 6, 1978, 92 Stat. 2943, provided that: ‘‘The amendments made by this subsection [amending this section] shall apply to taxable years beginning after December 31, 1976.’’ Amendment by section 421(e)(2) of Pub. L. 95–600 ap- plicable to taxable years beginning after Dec. 31, 1978, see section 421(g) of Pub. L. 95–600, set out as a note under section 5 of this title. EFFECTIVE DATE OF 1977 AMENDMENT Amendment by Pub. L. 95–30 applicable to taxable years beginning after Dec. 31, 1976, see section 106(a) of Pub. L. 95–30, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1976 AMENDMENT Pub. L. 94–455, title III, § 301(g)(1), Oct. 4, 1976, 90 Stat. 1553, provided that the amendment made by section 301(e) of Pub. L. 94–455 is effective for items of tax pref- erences for taxable years beginning after Dec. 31, 1975, with certain exceptions. Amendment by section 1204(c)(2) of Pub. L. 94–455 ef- fective with respect to action taken under section 6851, 6861, or 6862 of this title where the notice and demand takes place after Feb. 28, 1977, see section 1204(d) of Pub. L. 94–455, as amended, set out as a note under sec- tion 6851 of this title. For effective date of amendment by section 1607(b)(1)(C) of Pub. L. 94–455, see section 1608(c) of Pub. L. 94–455, set out as a note under section 857 of this title. EFFECTIVE DATE OF 1969 AMENDMENT Amendment by Pub. L. 91–172 applicable to taxable years ending after Dec. 31, 1969, see section 301(c) of Pub. L. 91–172, set out as a note under section 5 of this title. EFFECTIVE DATE OF 1960 AMENDMENT Amendment by Pub. L. 86–779 applicable with respect to taxable years of real estate investment trusts begin- ning after Dec. 31, 1960, see section 10(k) of Pub. L. 86–779, set out as an Effective Date note under section 856 of this title. APPLICABILITY OF CERTAIN AMENDMENTS BY PUB. L. 99–514 IN RELATION TO TREATY OBLIGATIONS OF UNITED STATES For applicability of amendment by section 701(e)(3) of Pub. L. 99–514 notwithstanding any treaty obligation of the United States in effect on Oct. 22, 1986, see section 1012(aa)(2) of Pub. L. 100–647, set out as a note under section 861 of this title. § 444. Election of taxable year other than re- quired taxable year (a) General rule Except as otherwise provided in this section, a partnership, S corporation, or personal service corporation may elect to have a taxable year other than the required taxable year. (b) Limitations on taxable years which may be elected (1) In general Except as provided in paragraphs (2) and (3), an election may be made under subsection (a)