Reg. § 1.1378-1 Taxable year of S corporation.
(a) In general The taxable year of an S corporation must be a permitted year. A permitted year is the required taxable year (i.e., a taxable year ending on December 31), a taxable year elected under section , a 52-53-week taxable year ending with reference to the required taxable year or a taxable year elected under section , or any other taxable year for which the corporation establishes a business purpose to the satisfaction of the Commissioner under section .
(b) Adoption of taxable year An electing S corporation may adopt, in accordance with , its required taxable year, a taxable year elected under section , or a 52-53-week taxable year ending with reference to its required taxable year or a taxable year elected under section without the approval of the Commissioner. See . An electing S corporation that wants to adopt any other taxable year, must establish a business purpose and obtain the approval of the Commissioner under section .
(c) Change in taxable year
(1) Approval required An S corporation or electing S corporation that wants to change its taxable year must obtain the approval of the Commissioner under section or make an election under section . However, an S corporation or electing S corporation may obtain automatic approval for certain changes, including a change to its required taxable year, pursuant to administrative procedures published by the Commissioner.
(2) Short period tax return An S corporation or electing S corporation that changes its taxable year must make its return for a short period in accordance with section , but must not annualize the corporation's taxable income.
(d) Retention of taxable year In certain cases, an S corporation or electing S corporation will be required to change its taxable year unless it obtains the approval of the Commissioner under section , or makes an election under section , to retain its current taxable year. For example, a corporation using a June 30 fiscal year that elects to be an S corporation and, as a result, is required to use the calendar year must obtain the approval of the Commissioner to retain its current fiscal year.
(e) Procedures for obtaining approval or making a section 444 election
(1) In general See for procedures to obtain the approval of the Commissioner (automatically or otherwise) to adopt, change, or retain a taxable year. See and for qualifications, and 1.444-3T for procedures, for making an election under section .
(2) Special rules for electing S corporations An electing S corporation that wants to adopt, change to, or retain a taxable year other than its required taxable year must request approval of the Commissioner on Form 2553, “Election by a Small Business Corporation,” when the election to be an S corporation is filed pursuant to section and . See for the manner of making an election to be an S corporation. If such corporation receives permission to adopt, change to, or retain a taxable year other than its required taxable year, the election to be an S corporation will be effective. Denial of the request renders the election ineffective unless the corporation agrees that, in the event the request to adopt, change to, or retain a taxable year other than its required taxable year is denied, it will adopt, change to, or retain its required taxable year or, if applicable, make an election under section .
(f) Effective date The rules of this section are applicable for taxable years ending on or after May 17, 2002.
[T.D. 8996, 67 FR 35024, May 17, 2002]