TITLE 26 - US CODE - PART IV - DEFINITIONS; MISCELLANEOUS

26 USC 1377 - Definitions and special rule

(a) Pro rata share 
For purposes of this subchapter
(1) In general 
Except as provided in paragraph (2), each shareholders pro rata share of any item for any taxable year shall be the sum of the amounts determined with respect to the shareholder
(A) by assigning an equal portion of such item to each day of the taxable year, and
(B) then by dividing that portion pro rata among the shares outstanding on such day.
(2) Election to terminate year 

(A) In general 
Under regulations prescribed by the Secretary, if any shareholder terminates the shareholders 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.
(B) Affected shareholders 
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.
(b) Post-termination transition period 

(1) In general 
For purposes of this subchapter, the term post-termination transition period means
(A) the period beginning on the day after the last day of the corporations last taxable year as an S corporation and ending on the later of
(i) the day which is 1 year after such last day, or
(ii) the due date for filing the return for such last year as an S corporation (including extensions),
(B) the 120-day period beginning on the date of any determination pursuant to an audit of the taxpayer which follows the termination of the corporations election and which adjusts a subchapter S item of income, loss, or deduction of the corporation arising during the S period (as defined in section 1368 (e)(2)), and
(C) the 120-day period beginning on the date of a determination that the corporations election under section 1362 (a) had terminated for a previous taxable year.
(2) Determination defined 
For purposes of paragraph (1), the term determination means
(A) a determination as defined in section 1313 (a), or
(B) an agreement between the corporation and the Secretary that the corporation failed to qualify as an S corporation.
(3) Special rules for audit related post-termination transition periods 

(A) No application to carryovers 
Paragraph (1)(B) shall not apply for purposes of section 1366 (d)(3).
(B) Limitation on application to distributions 
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.
(c) Manner of making elections, etc. 
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.

26 USC 1378 - Taxable year of S corporation

(a) General rule 
For purposes of this subtitle, the taxable year of an S corporation shall be a permitted year.
(b) Permitted year defined 
For purposes of this section, the term permitted year means a taxable year which
(1) is a year ending December 31, or
(2) is any other accounting period for which the corporation establishes a business purpose to the satisfaction of the Secretary.

For purposes of paragraph (2), any deferral of income to shareholders shall not be treated as a business purpose.

26 USC 1379 - Transitional rules on enactment

(a) Old elections 
Any election made under section 1372 (a) (as in effect before the enactment of the Subchapter S Revision Act of 1982) shall be treated as an election made under section 1362.
(b) References to prior law included 
Any references in this title to a provision of this subchapter shall, to the extent not inconsistent with the purposes of this subchapter, include a reference to the corresponding provision as in effect before the enactment of the Subchapter S Revision Act of 1982.
(c) Distributions of undistributed taxable income 
If a corporation was an electing small business corporation for the last preenactment year, subsections (f) and (d) of section 1375 (as in effect before the enactment of the Subchapter S Revision Act of 1982) shall continue to apply with respect to distributions of undistributed taxable income for any taxable year beginning before January 1, 1983.
(d) Carryforwards 
If a corporation was an electing small business corporation for the last preenactment year and is an S corporation for the 1st postenactment year, any carryforward to the 1st postenactment year which arose in a taxable year for which the corporation was an electing small business corporation shall be treated as arising in the 1st postenactment year.
(e) Preenactment and postenactment years defined 
For purposes of this subsection
(1) Last preenactment year 
The term last preenactment year means the last taxable year of a corporation which begins before January 1, 1983.
(2) 1st postenactment year 
The term 1st postenactment year means the 1st taxable year of a corporation which begins after December 31, 1982.