SEC. 1361-Continued ANCILLARY PROVISIONS (P.L. 85-866, § 63)—Continued before such expiration date, notwithstanding any law or rule of law which would otherwise prevent such assessment. "(2) Îf credit or refund of the amount of any overpayment is prevented, at any time on or before the expiration date specified in subsection (c), by the operation of any law or rule of law (other than chapter 74 of the Internal Revenue Code of 1954 [§§ 7121-7123], relating to closing agreements and compromises), credit or refund of such overpayment may, nevertheless, be allowed or made, to the extent such overpayment is attributable to such enterprise and to the period referred to in paragraph (1), if claim therefor is filed on or before the expiration date specified in subsection (c). "(c) EXPIRATION DATE DEFINED. For purposes of subsection (b), the term 'expiration date' means that day which is one year after whichever of the following days is the earlier: "(1) The last day of the third month following the month in which regulations prescribed under section 1361 of the Internal Revenue Code of 1954 are published in the Federal Register [October 11, 1960, 25 F.R. 9723]; or "(2) if the election is revoked under subsection (a), the day on which such revocation is filed with the Secretary of the Treasury or his delegate. "(d) EXCEPTION.-This section shall not apply to any statement of election filed with respect to any unincorporated business enterprise under section 1361 of the Internal Revenue Code of 1954, if, before the date of the enactment of this Act, such statement of election has been withdrawn with the permission of the Secretary of the Treasury or his delegate." CH. 1, SUBCHAPTER S-ELECTION OF CERTAIN SMALL BUSINESS CORPORATIONS AS TO TAXABLE STATUS (Added 195872 Stat. 1650–1656): Subchapter S. Sept. 2, 1958, H.R. 8381, P.L. 85-866, § 64 (a), 72 Stat. 1650-1656: (added) Amended Chapter 1 (normal taxes and surtaxes) by inserting after Subchapter R (election of certain partnerships and proprietorships as to taxable status) a new Subchapter as follows: "Subchapter S-Election of Certain Small Business Corporations as to Taxable Status "Sec. 1371. Definitions. "Sec. 1372. Election by small business corporation. "Sec. 1373. Corporation undistributed taxable income taxed to share holders. "Sec. 1374. Corporation net operating loss allowed to shareholders. "Sec. 1376. Adjustment to basis of stock of, and indebtedness owing, shareholders. "Sec. 1377. Special rules applicable to earnings and profits of electing followed by the text of the new sections, 1371-1377, inclusive. Only taxable years beginning after December 31, 1957. The complete text of Subchapter S of Chapter 1, as enacted September 2, 1958, will be found in slip law 85-866, at pages 45-51. Amendments made since September 2, 1958, are set forth below. SEC. 1371. DEFINITIONS (Added 1958-72 Stat. 1650): (c) - - (added) (d)____ (added) Sept. 23, 1959, H.R. 47, P.L. 86-376, § 2(a), 73 Stat. 699: "(c) STOCK OWNED BY HUSBAND AND WIFE.-For purposes of subsection (a) (1) stock which "(1) is community property of a husband and wife (or the income from which is community income) under the applicable community property law of a State, or "(2) is held by a husband and wife as joint tenants, tenants by the entirety, or tenants in common, shall be treated as owned by one shareholder." Applicability: Taxable years beginning after December 31, 1959.315 See "ANCILLARY PROVISIONS" under Secs. 6213 and 6511 below. "(d) OWNERSHIP OF CERTAIN STOCK.-For purposes of subsection (a), a corporation shall not be considered a member of an affiliated 315 Subsection (d) of section 2 of P.L. 86-376 provided as follows: "(d) The amendment made by subsection (a) [this amendment] shall apply to taxable years beginning after December 31, 1959. The amendments made by subsections (b) and (c) [amending, respectively, Sec. 1374(b) and Sec. 1504(b)] shall take effect on the day after the date of the enactment of this Act." The provision with respect to the applicability of the new subsection (c) was changed by P.L. 87-834, § 23, 76 Stat. 1065-1066, as follows: "SEC. 23. EFFECTIVE DATE OF SECTION 1371(c) OF THE INTERNAL REVENUE CODE OF 1954. "(a) IN GENERAL.-Subject to the provisions of subsection (b), section 1371 (c) of the Internal Revenue Code of 1954 (as added by section 2(a) of the Act entitled "An Act to amend the Internal Revenue Code of 1954 to provide a personal exemption for children placed for adoption and to clarify certain provisions relating to the election of small business corporations as to taxable status", approved September 23, 1959 (Public Law 86-376)), shall (notwithstanding the provisions of the first sentence of section 2(d) of such Act) also apply to taxable years beginning after December 31, 1957, and before January 1, 1960. "(b) ELECTION AND CONSENT BY CORPORATIONS; CONSENTS BY SHAREHOLDERS.-Subsection (a) shall apply with respect to any corporation and its shareholders only if, within one year after the date of the enactment of this Act "(1) such corporation (in such manner as the Secretary of the Treasury or his delegate prescribes by regulations) elects to have the provisions of subsection (a) apply and consents to the application of subsection (c); and "(2) each person who is a shareholder of such corporation on the date on which such corporation makes such election, and each person who was a shareholder of such corporation during any taxable year of such corporation beginning after December 31, 1957, and ending before the date of such election, consents (in such manner and at such time as the Secretary of the Treasury or his delegate prescribes by regulations) to such election and to the application of subsection (c). "(c) TOLLING OF STATUTES OF LIMITATIONS.-In any case in which a corporation makes an election under subsection (b)— "(1) if the assessment of any deficiency against the corporation making such election, or any shareholder of such corporation who consents to such election, for any taxable year is prevented, at any time on or before the expiration of one year after the date of such election, by the operation of any law or rule of law, assessment of such deficiency may, nevertheless, be made, to the extent such deficiency is attributable to the application of subsection (a), at any time on or before the expiration of such one-year period; and (2) if credit or refund of any overpayment of tax by the corporation making such election, or any shareholder of such corporation who consents to such election, for any taxable year is prevented, at any time on or before the expiration of one year after the date of such election, by the operation of any law or rule of law, credit or refund of such overpayment may, nevertheless, be allowed or made, to the extent such overpayment is attributable to the application of subsection (a), if claim therefor is filed on or before the expiration of such one-year period.” SEC. 1371 (added 1958)-Continued (d) (revised 1964)-Continued group at any time during any taxable year by reason of the ownership of stock in another corporation if such other corporation— (1) has not begun business at any time on or after the date of its incorporation and before the close of such taxable year, and "(2) does not have taxable income for the period included within such taxable year." Applicability: Taxable years of corporations beginning after December 31, 1962. (Id., § 233(c), 78 Stat. 113.) SEC. 1372. ELECTION BY SMALL BUSINESS CORPORATION (Added 1958-72 Stat. 1650-1652): (g). May 4, 1961, H.R. 5189, P.L. 87-29, § 2, 75 Stat. 64: Amended Sec. 1372 (as added by P.L. 85-866, § 64(a)) by adding at the end thereof, after subsection (f) (election after termination), the following new subsection (g): "(g) CONSENT TO ELECTION BY CERTAIN SHAREHOLDERS OF STOCK HELD AS COMMUNITY PROPERTY.-If a husband and wife owned stock which was community property (or the income from which was community income) under the applicable community property law of a State, and if either spouse filed a timely consent to an election under subsection (a) for a taxable year beginning before January 1, 1961, the time for filing the consent of the other spouse to such election shall not expire prior to May 15, 1961." Applicability: Indicated by the terms of the amendment. SEC. 1374. CORPORATION NET OPERATING LOSS ALLOWED TO SHAREHOLDERS (Added 1958-72 Stat. 1653–1654): Sept. 23, 1959, H.R. 47, P.L. 86-376, § 2(b), 73 Stat. 699: (b)... clause added) Amended Sec. 1374 (b) (as added by P.L. 85-866, § 64(a)), which read as follows (72 Stat. 1653): "(b) ALLOWANCE OF DEDUCTION.-Each person who is a shareholder of an electing small business corporation at any time during a taxable year of the corporation in which it has a net operating loss shall be allowed as a deduction from gross income, for his taxable year in which or with which the taxable year of the corporation ends, an amount equal to his portion of the corporation's net operating loss (as determined under subsection (c)).", by inserting after "the taxable year of the corporation ends" the following: "(or for the final taxable year of a shareholder who dies before the end of the corporation's taxable year)". Effective Date: September 24, 1959-the day after the date of enactment.316 (Id., § 2(d), 73 Stat. 699. See n. 315, p. 502 above.) 316 P.L. 87-834, § 30 (Oct. 16, 1962), 76 Stat. 1069, provided as follows: "SEC. 30. EFFECTIVE DATE OF AMENDMENT TO SECTION 1374(b). "The amendment made by section 2(b) of Public Law 86-376 (73 Stat. 699) shall take effect on September 2, 1958." SEC. 1375. SPECIAL RULES APPLICABLE TO DISTRIBUTIONS OF ELECTING SMALL BUSINESS CORPORATIONS (Added 1958-72 Stat. 1654-1655): (b). (e)_ (added) Feb. 26, 1964, H.R. 8363, P.L. 88-272, § 201 (d) (13), 78 Stat. 32: Dividends received after December 31, 1964, in taxable years ending after such date. (Id., § 201(e), 78 Stat. 32-33.) Feb. 26, 1964, H.R. 8363, P.L. 88-272 § 233 (b), 78 Stat. 112-113: Amended Sec. 1375 (as added by P.L. 85-866, § 64(a)) by adding at the end thereof, after subsection (d) (relating to distributions of undistributed taxable income previously taxed to shareholders), the following new subsection (e): "(e) CERTAIN DISTRIBUTIONS AFTER CLOSE OF TAXABLE YEAR."(1) IN GENERAL.-For purposes of this chapter, if "(A) a corporation makes a distribution of money to its shareholders on or before the 15th day of the third month following the close of a taxable year with respect to which it was an electing small business corporation, and "(B) such distribution is made pursuant to a resolution of the board of directors of the corporation, adopted before the close of such taxable year, to distribute to its shareholders all or a part of the proceeds of one or more sales of capital assets, or of property described in section 1231 (b), made during such taxable year, such distribution shall, at the election of the corporation, be treated as a distribution of money made on the last day of such taxable year. "(2) SHAREHOLDERS. An election under paragraph (1) with respect to any distribution may be made by a corporation only if each person who is a shareholder on the day the distribution is received "(A) owns the same proportion of the stock of the corporation on such day as he owned on the last day of the taxable year of the corporation preceding the distribution, and "(B) consents to such election at such time and in such manner as the Secretary or his delegate shall prescribe by regulations. "(3) MANNER AND TIME OF ELECTION.-An election under paragraph (1) shall be made in such manner as the Secretary or his delegate shall prescribe by regulations. Such election shall be made not later than the time prescribed by law for filing the return for the taxable year during which the sale was made (including extensions thereof) except that, with respect to any taxable year ending on or before the date of the enactment of the 317 Subsection (b) of section 1375 (as added by P.L. 85-866, § 648(a)) read as follows (72 Stat. 1654): "(b) DIVIDENDS RECEIVED CREDIT NOT ALLOWED.-The amount includible in the gross income of a shareholder as dividends from an electing small business corporation during any taxable year of the corporation (including any amount treated as a dividend under section 1373(b)) shall not be considered a dividend for purposes of section 34, section 37, or section 116 to the extent that such amount is a distribution of property out of earnings and profits of the taxable year as specified in section 316(a)(2). For purposes of this subsection, the earnings and profits of the taxable year shall be deemed not to exceed the corporation's taxable income (computed as provided in section 1373(d)) for the taxable year." SEC. 1375 (added 1958)—Continued (e) (added 1964)-Continued Revenue Act of 1964, such election shall be made within 120 days after such date." Applicability: Taxable years of corporations beginning after December 31, 1957. (Id., § 233(c), 78 Stat. 113.) CH. 1, SUBCHAPTER T-COOPERATIVES AND THEIR PATRONS (Added 1962-76 Stat. 1045–1051): Subchapter T. Oct. 16, 1962, H.R. 10650, P.L. 87-834, § 17(a), 76 Stat. 1045–1051: (added) Amended Chapter 1 (relating to mormal taxes and surtaxes) by adding at the end thereof, after Subchapter S (election of certain small business corporations as to taxable status-as added by P.L. 85-866, § 64(a)), the following new Subchapter T: 318 "Subchapter T-Cooperatives and Their Patrons "Part I. Tax treatment of cooperatives. "Part II. Tax treatment by patrons of patronage dividends. followed by the text of the sections thereof grouped under the respec- "PART I-TAX TREATMENT OF COOPERATIVES "Sec. 1381. Organizations to which part applies. "Sec. 1382. Taxable income of cooperatives. "Sec. 1383. Computation of tax where cooperative redeems nonqualified written notices of allocation.", PART II-TAX TREATMENT BY PATRONS OF PATRONAGE DIVIDENDS "Sec. 1385. Amounts includible in patron's gross income.", "PART III-DEFINITIONS; SPECIAL RULES "Sec. 1388. Definitions; special rules.” Applicability: "(1) FOR THE COOPERATIVES. Except as provided in paragraph (3), the amendments made by subsections (a) and (b)319 shall apply to taxable years of organizations described in section 1381(a) of the Internal Revenue Code of 1954 (as added by subsection (a)) beginning after December 31, 1962. 66 (2) FOR THE PATRONS.-Except as provided in paragraph (3), section 1385 of the Internal Revenue Code of 1954 (as added by subsection (a)) shall apply with respect to any amount received from any organization described in section 1381 (a) of such Code, to the extent that such amount is paid by such organization in a taxable year of such organization beginning after December 31, 1962. "(3) APPLICATION OF EXISTING LAW. In the case of any money, written notice of allocation, or other property paid by any organization described in section 1381(a) "(A) before the first day of the first taxable year of such organization beginning after December 31, 1962, or "(B) on or after such first day with respect to patronage occurring before such first day, the tax treatment of such money, written notice of allocation, or other property (including the tax treatment of gain or loss on the redemp 319 The complete text of the new Subchapter T as enacted October 16, 1962, will be found in slip law 87-834, at pages 86-92. 319 The amendments here referred to were as follows: Subsection (a) added the new Subchapter T; Subsection (b) amended Secs. 521(a), and 6072(d), repealed Sec. 522, and amended the table of Subchapters for Chapter 1 and the table of sections for Part III of Subchapter Flof Chapter 1. 60-448-67-33 |