Page:United States Statutes at Large Volume 72 Part 1.djvu/1698

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PUBLIC LAW 86-866-SEPT. 2, 1968

[72 S T A T.

"SEC. 1377. SPECIAL RULES APPLICABLE TO EARNINGS AND PROFITS OF ELECTING SMALL BUSINESS CORPORATIONS. "(a)

REDUCTION FOR UNDISTRIBUTED TAXABLE INCOME.—The

ac-

cumulated earnings and profits of an electing small business corporation as of the close of its taxable year shall be reduced to the extent that its undistributed taxable income for such year is required to be included in the gross income of the shareholders of such corporation under section 1373(b). " (b) CURRENT EARNINGS AND PROFITS NOT REDUCED BY A N Y AMOUNT NOT ALLOWABLE AS DEDUCTION.—The earnings and profits of

an electing small business corporation for any taxable year (but not its accumulated earnings and profits) shall not be reduced by any amount which is not allowable as a deduction in computing its taxable income (as provided in section 1373(d)) for such taxable year. "(c)

EARNINGS AND PROFITS NOT AFFECTED BY N E T OPERATING

Loss.—The earnings and profits and the accumulated earnings and rofits of an electing small business corporation shall not be affected y any item of gross income or any deduction taken into account in determining the amount of any net operating loss (computed as provided in section 1374(c)) of such corporation." (b) N E T OPERATING Loss DISALLOWED TO ELECTING SMALL B U S I NESS CORPORATION.—Section 172 (relating to net operating loss deduction) is amended by redesignating subsection (h) as. (i), and by inserting after subsection (g) the following new subsection: " (h) DISALLOWANCE OF N E T OPERATING Loss OF ELECTING SMALL BUSINESS CORPORATIONS.—In determining the amount of the net operating loss deduction under subsection (a) of any corporation, there shall be disregarded the net operating loss of such corporation for any taxable year for which such corporation is an electing small business corporation under subchapter S."

E

26 USC 172.

(c)

26 USC 6012.

RETURNS BY ELECTING SMALL BUSINESS CORPORATIONS.—Sub-

part A of part III of subchapter A of chapter 61 (relating to information returns) is amended by renumbering section 6037 as 6038, and by inserting after section 6036 the following new section: "SEC. 6037. RETURN OF ELECTING SMALL BUSINESS CORPORATION. "Every electing small business corporation (as defined in section 1371 (a)(2)) shall make a return for each taxable year, stating specifically the items of its gross income and the deductions allowable by subtitle A, the names and addresses of all persons owning stock in the corporation at any time during the taxable year, the number of shares of stock owned by each shareholder at all times during the taxable year, the amount of money and other property distributed by the corporation during the taxable year to each shareholder, the date of each such distribution, and such other information, for the purpose of carrying out the provisions of subchapter S of chapter 1, as the Secretary or his delegate may by forms and regulations prescribe. Any return filed pursuant to this section shall, for purposes of chapter 66 (relating to limitations), be treated as a return filed by the corporation under section 6012." (d) TECHNICAL AMENDMENTS.—

(1) The table of subchapters for chapter 1 is amended by adding at the end thereof "SuBCHAPTEB S.—Election of certain small business corporations as to taxable status."

26 USC 1016.

(2) Section 1016(a) (relating to adjustments of basis) is amended by striking out the period at the end of paragraph (17) (as added by section 16(b) of this Act) and inserting in lieu

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