Page:United States Statutes at Large Volume 96 Part 2.djvu/319

 PUBLIC LAW 97-354—OCT. 19, 1982

96 STAT. 1681

"(2) the adjustments to the accumulated adjustments account which are required by subsection (e)(D. "(e) DEFINITIONS AND SPECIAL RULES.—For purposes of this section— "(1) ACCUMULATED ADJUSTMENTS ACCOUNT.—

"(A) IN GENERAL.—Except as provided in subparagraph (B), the term 'accumulated adjustments account' means an account of the S cor^ration which is adjusted for the S period in a manner similar to the adjustments under section 1367 (except that no adjustment shall be made for income which is exempt from tax under this title and no adjustment shall be made for any expense not deductible in computing the corporation's taxable income and not properly chargeable to capital account).

^^te, p. i679.

(B) AMOUNT OF ADJUSTMENT IN THE CASE OF REDEMP-

TIONS.—In the case of any redemption which is treated as an exchange under section 302(a) or 303(a), the adjustment in the accumulated adjustments account shall be an amount which bears the same ratio to the balance in such account as the number of shares redeemed in such redemption bears to the number of shares of stock in the corporation immediately before such redemption. "(2) S PERIOD.—The term *S period' means the most recent continuous period during which the corporation has been an S corporation. Such period shall not include any taxable year beginning before January 1, 1983. "PART III—SPECIAL RULES "Sec. "Sec. "Sec. "Sec. "Sec.

1371. Coordination with subchapter C. 1372. Partnership rules to apply for fringe benefit purposes. 1373. Foreign income. 1374. Tax imposed on certain capital gains. 1375. Tax imposed when passive investment income of corporation having subchapter C earnings and profits exceeds 25 percent of gross receipts. "SEC. 1371. COORDINATION WITH SUBCHAPTER C. "(a) APPLICATION OF SUBCHAPTER C RULES.—

"(1) IN GENERAL.—Except as otherwise provided in this title, and except to the extent inconsistent with this subchapter, subchapter C shall apply to an S corporation and its shareholders. "(2) S CORPORATION AS SHAREHOLDER TREATED LIKE INDIVIDUAL.—For purposes of subchapter C, an S corporation in its capacity as a shareholder of another corporation shall be treated as an individual. "(b) NO CARRYOVER BETWEEN C YEAR AND S YEAR.— "(1) FROM C YEAR TO S YEAR.—NO carryforward, and no carry-

back, arising for a taxable year for which a corporation is a C corporation may be carried to a taxable year for which such corporation is an S corporation. (2) No CARRYOVER FROM s YEAR.—No Carryforward, and no carryback, shall arise at the corporate level for a taxable year for which a corporation is an S corporation. "(3) TREATMENT OP S YEAR AS ELAPSED YEAR.—Nothing in

paragraphs (1) and (2) shall prevent treating a taxable year for which a corporation is an s corporation as a taxable year for

26 USC 1371

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