Treasury Regulations (26 C.F.R.)
26 CFR § 1.1363-1
Effect of election on corporation.
# (a)
Exemption of corporation from income tax—(1) In general. Except as provided in this paragraph (a), a small business corporation that makes a valid election under section 1362(a) is exempt from the taxes imposed by chapter 1 of the Internal Revenue Code with respect to taxable years of the corporation for which the election is in effect.
(2) Corporate level taxes. An S corporation is not exempt from the tax imposed by section 1374 (relating to the tax imposed on certain built-in gains), or section 1375 (relating to the tax on excess passive investment income). See also section 1363(d) (relating to the recapture of LIFO benefits) for the rules regarding the payment by an S corporation of LIFO recapture amounts.
# (b) Computation of corporate taxable income.
The taxable income of an S corporation is computed as described in section 1363(b).
# (c)
Elections of the S corporation—(1) In general. Any elections (other than those described in paragraph (c)(2) of this section) affecting the computation of items derived from an S corporation are made by the corporation. For example, elections of methods of accounting, of computing depreciation, of treating soil and water conservation expenditures, and the option to deduct as expenses intangible drilling and development costs, are made by the corporation and not by the shareholders separately. All corporate elections are applicable to all shareholders.
(2) Exceptions. (i) Each shareholder's pro rata share of expenses described in section 617 paid or accrued by the S corporation is treated according to the shareholder's method of treating those expenses, notwithstanding the treatment of the expenses by the corporation.
(ii) Each shareholder may elect to amortize that shareholder's pro rata share of any qualified expenditure described in section 59(e) paid or accrued by the S corporation.
(iii) Each shareholder's pro rata share of taxes described in section 901 paid or accrued by the S corporation to foreign countries or possessions of the United States (according to its method of treating those taxes) is treated according to the shareholder's method of treating those taxes, and each shareholder may elect to use the total amount either as a credit against tax or as a deduction from income.
# (d) Effective date.
This section applies to taxable years of corporations beginning after December 31, 1992. For taxable years to which this section does not apply, corporations and shareholders subject to the provisions of section 1363 must take reasonable return positions taking into consideration the statute, its legislative history and these regulations. See Notice 92-56, 1992-49 I.R.B. (see § 601.601(d)(2)(ii)(b) of this chapter), for additional guidance regarding reasonable return positions for taxable years to which this section does not apply.
[T.D. 8449, 57 FR 55456, Nov. 25, 1992]
Source: view the official text
In this part (40 sections)
- 1.1347-1 · Tax on certain amounts received from the United States.
- 1.1348-1 · Fifty-percent maximum tax on earned income.
- 1.1348-2 · Computation of the fifty-percent maximum tax on earned…
- 1.1348-3 · Definitions.
- 1.1361-0 · Table of contents.
- 1.1361-1 · S corporation defined.
- 1.1361-2 · Definitions relating to S corporation subsidiaries.
- 1.1361-3 · QSub election.
- 1.1361-4 · Effect of QSub election.
- 1.1361-5 · Termination of QSub election.
- 1.1361-6 · Effective date.
- 1.1362-0 · Table of contents.
- 1.1362-1 · Election to be an S corporation.
- 1.1362-2 · Termination of election.
- 1.1362-3 · Treatment of S termination year.
- 1.1362-4 · Inadvertent terminations and inadvertently invalid elections.
- 1.1362-5 · Election after termination.
- 1.1362-6 · Elections and consents.
- 1.1362-7 · Effective dates.
- 1.1362-8 · Dividends received from affiliated subsidiaries.
- 1.1363-1 · Effect of election on corporation.
- 1.1363-2 · Recapture of LIFO benefits.
- 1.1366-0 · Table of contents.
- 1.1366-1 · Shareholder's share of items of an S corporation.
- 1.1366-2 · Limitations on deduction of passthrough items of an S…
- 1.1366-3 · Treatment of family groups.
- 1.1366-4 · Special rules limiting the passthrough of certain items of…
- 1.1366-5 · Effective/applicability date.
- 1.1367-0 · Table of contents.
- 1.1367-1 · Adjustments to basis of shareholder's stock in an S…
- 1.1367-2 · Adjustments to basis of indebtedness to shareholder.
- 1.1367-3 · Effective/Applicability date.
- 1.1368-0 · Table of contents.
- 1.1368-1 · Distributions by S corporations.
- 1.1368-2 · Accumulated adjustments account (AAA).
- 1.1368-3 · Examples.
- 1.1368-4 · Effective date and transition rule.
- 1.1371-1 · Distributions of money by an eligible terminated S…
- 1.1371-2 · Impact of Audit PTTP on ETSC Period.
- 1.1374-0 · Table of contents.