Page:United States Statutes at Large Volume 96 Part 2.djvu/320

 96 STAT. 1682

PUBLIC LAW 97-354—OCT. 19, 1982 purposes of determining the number of taxable years to which an item may be carried back or carried forward. "(c) EARNINGS AND PROFITS.—

"(1) IN GENERAL.—Except as provided in paragraphs (2) and (3), no adjustment shall be made to the earnings and profits of an S corporation. "(2) ADJUSTMENTS FOR REDEMPTIONS, LIQUIDATIONS, REORGANIZATIONS, DivisiVES, ETC.—In the case of any transaction involv-

26 USC 301.

ing the application of subchapter C to any S corporation, proper adjustment to any accumulated earnings and profits of the corporation shall be made. "(3) ADJUSTMENTS IN CASE OF DISTRIBUTIONS TREATED AS DIVIDENDS UNDER SECTION 1368(C)(2).—Paragraph (1) shall not

Ante, p. 1680.

apply with respect to that portion of a distribution which is treated as a dividend under section 1368(c)(2). "(d) COORDINATION WITH INVESTMENT CREDIT RECAPTURE.—

Ante, p. 1672.

"(1) No RECAPTURE B REASON OF ELECTION.—Any election Y under section 1362 shall be treated as a mere change in the form of conducting a trade or business for purposes of the second sentence of section 47(b). "(2) CORPORATION CONTINUES TO BE LIABLE.—Notwithstanding

an election under section 1362, an S corporation shall continue to be liable for any increase in tax under section 47 attributable to credits allowed for taxable years for which such corporation was not an S corporation. "(e) CASH DISTRIBUTIONS DURING POST-TERMINATION TRANSITION

PERIOD.—Any distribution of money by a corporation with respect to its stock during a post-termination transition period shall be applied against and reduce the adjusted basis of the stock, to the extent that the amount of the distribution does not exceed the accumulated adjustments account. 26 USC 1372.

"SEC. 1372. PARTNERSHIP RULES TO APPLY FOR FRINGE BENEFIT PURPOSES. "(a) GENERAL RULE.—For purposes of applying the provisions of

this subtitle which relate to employee fringe benefits— "(1) the S corporation shall be treated as a partnership, and "(2) any 2-percent shareholder of the S corporation shall be treated as a partner of such partnership. "(b) 2-PERCENT SHAREHOLDER DEFINED.—For purposes of this section, the term '2-percent shareholder' means any person who owns (or is considered as owning within the meaning of section 318) on any day during the taxable year of the S corporation more than 2 percent of the outstanding stock of such corporation or stock possessing more than 2 percent of the total combined voting power of all stock of such corporation. 26 USC 1373.

"SEC. 1373. FOREIGN INCOME. "(a) S CORPORATION TREATED AS PARTNERSHIP, ETC.—For purposes

26 USC 901, 951. of subparts A and F of part III, and part V, of subchapter N (relating 26 USC 999. to income from sources without the United States)— "(1) an S corporation shall be treated as a partnership, and "(2) the shareholders of such corporation shall be treated as partners of such partnership. "(b) RECAPTURE OF OVERALL FOREIGN LOSS.—For purposes of section 904(f) (relating to recapture of overall foreign loss), the making

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