View all text of Part I [§ 1361 - § 1363]
§ 1363. Effect of election on corporation
(a) General rule
(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 1366(a)(1)(A) shall be separately stated,
(2) the deductions referred to in section 703(a)(2) shall not be allowed to the corporation,
(3) section 248 shall apply, and
(4) section 291 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
(2) Exceptions
In the case of an S corporation, elections under the following provisions shall be made by each shareholder separately—
(A) section 617 (relating to deduction and recapture of certain mining exploration expenditures), and
(B) section 901 (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 1362(a) 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
(B) Date for payment of installments
(C) No interest for period of extension
(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 471, 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
(B) Inventory assets
(C) Method of determining inventory amount
The inventory amount of assets under a method authorized by section 471 shall be determined—
(i) if the corporation uses the retail method of valuing inventories under section 472, 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
(5) Special rule
(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.)