§ 1363 Effect of election on corporation
(a) General rule
Except as otherwise provided in this subchapter, an S corporation shall not be subject to the taxes imposed by this chapter.
(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 shall be separately stated,
(2) the deductions referred to in section shall not be allowed to the corporation,
(3) section shall apply, and
(4) section 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 (relating to deduction and recapture of certain mining exploration expenditures), and
(B) section (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 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 corporation’s return for the 3 succeeding taxable years.
(C) No interest for period of extension
Notwithstanding section , for purposes of section , 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 , 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 .
(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 shall be determined—
(i) if the corporation uses the retail method of valuing inventories under section , 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 and shall not apply with respect to any increase in the tax imposed by reason of this subsection.
(Added Pub. L. 97–354, § 2, Oct. 19, 1982, 96 Stat. 1676; amended Pub. L. 98–369, div. A, title VII, § 721(a), (b)(1), (p), July 18, 1984, 98 Stat. 966, 970; Pub. L. 99–514, title V, § 511(d)(2)(C), title VI, § 632(b), title VII, § 701(e)(4)(J), Oct. 22, 1986, 100 Stat. 2249, 2277, 2343; Pub. L. 100–203, title X, § 10227(a), Dec. 22, 1987, 101 Stat. 1330–416; Pub. L. 100–647, title I, § 1006(f)(7), title II, § 2004(n), Nov. 10, 1988, 102 Stat. 3407, 3608; Pub. L. 109–135, title IV, § 411(a), Dec. 21, 2005, 119 Stat. 2636.)
Operative text only. Editorial notes, amendment history, and effective dates: official OLRC text of § 1363