(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 corporations 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.
