Internal Revenue Code · 26 U.S.C.
§ 1361. S corporation defined
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 1361
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Added
- October 19, 1982 by Pub. L. 97–354
- Last amended
- March 23, 2018 by Pub. L. 115–141
- Amendments
- 13 dated changes in the source credit
- Length
- 7 subsections · 3,059 words · about 13 min to read
- Defines
- 16 terms
- Cross-references
- cites 21; cited by 7 Code sections and 92 other regulations
- Regulations
- 7 issued under this section
For purposes of this title, the term “S corporation” means, with respect to any taxable year, a small business corporation for which an election under section 1362(a) is in effect for such year.
For purposes of this title, the term “C corporation” means, with respect to any taxable year, a corporation which is not an S corporation for such year.
For purposes of this title, if any corporation which was a qualified subchapter S subsidiary ceases to meet the requirements of subparagraph (B), such corporation shall be treated as a new corporation acquiring all of its assets (and assuming all of its liabilities) immediately before such cessation from the S corporation in exchange for its stock.
Except to the extent provided by the Secretary, this paragraph shall not apply to part III of subchapter A of chapter 61 (relating to information returns).
The term “members of a family” means a common ancestor, any lineal descendant of such common ancestor, and any spouse or former spouse of such common ancestor or any such lineal descendant.
An individual shall not be considered to be a common ancestor if, on the applicable date, the individual is more than 6 generations removed from the youngest generation of shareholders who would (but for this subparagraph) be members of the family. For purposes of the preceding sentence, a spouse (or former spouse) shall be treated as being of the same generation as the individual to whom such spouse is (or was) married.
Any legally adopted child of an individual, any child who is lawfully placed with an individual for legal adoption by the individual, and any eligible foster child of an individual (within the meaning of section 152(f)(1)(C)), shall be treated as a child of such individual by blood.
The Secretary shall prescribe such regulations as may be necessary or appropriate to provide for the proper treatment of straight debt under this subchapter and for the coordination of such treatment with other provisions of this title.
A beneficiary of a qualified subchapter S trust (or his legal representative) may elect to have this subsection apply.
An election under this paragraph shall be made separately with respect to each corporation the stock of which is held by the trust.
If there is an election under this paragraph with respect to any beneficiary, an election under this paragraph shall be treated as made by each successive beneficiary unless such beneficiary affirmatively refuses to consent to such election.
Any election, or refusal, under this paragraph shall be made in such manner and form, and at such time, as the Secretary may prescribe.
An election under this paragraph, once made, may be revoked only with the consent of the Secretary.
An election under this paragraph shall be effective up to 15 days and 2 months before the date of the election.
If a qualified subchapter S trust ceases to meet any requirement of paragraph (3)(A), the provisions of this subsection shall not apply to such trust as of the date it ceases to meet such requirement.
If any qualified subchapter S trust ceases to meet any requirement of paragraph (3)(B) but continues to meet the requirements of paragraph (3)(A), the provisions of this subsection shall not apply to such trust as of the first day of the first taxable year beginning after the first taxable year for which it failed to meet the requirements of paragraph (3)(B).
For purposes of subparagraph (A), the term “purchase” means any acquisition if the basis of the property acquired is determined under section 1012.
For purposes of this section, the term “potential current beneficiary” means, with respect to any period, any person who at any time during such period is entitled to, or at the discretion of any person may receive, a distribution from the principal or income of the trust (determined without regard to any power of appointment to the extent such power remains unexercised at the end of such period). If a trust disposes of all of the stock which it holds in an S corporation, then, with respect to such corporation, the term “potential current beneficiary” does not include any person who first met the requirements of the preceding sentence during the 1-year period ending on the date of such disposition.
An election under this subsection shall be made by the trustee. Any such election shall apply to the taxable year of the trust for which made and all subsequent taxable years of such trust unless revoked with the consent of the Secretary.
Restricted bank director stock shall not be taken into account as outstanding stock of the S corporation in applying this subchapter (other than section 1368(f)).
For treatment of certain distributions with respect to restricted bank director stock, see section 1368(f).
In the case of a bank which changes from the reserve method of accounting for bad debts described in section 585 or 593 for its first taxable year for which an election under section 1362(a) is in effect, the bank may elect to take into account any adjustments under section 481 by reason of such change for the taxable year immediately preceding such first taxable year.
(Added Pub. L. 97–354, § 2, Oct. 19, 1982, 96 Stat. 1669; amended Pub. L. 98–369, div. A, title VII, § 721(c), (f), July 18, 1984, 98 Stat. 967; Pub. L. 99–514, title IX, § 901(d)(4)(G), title XVIII, § 1879(m)(1)(A), Oct. 22, 1986, 100 Stat. 2380, 2910; Pub. L. 100–647, title I, § 1018(q)(2), Nov. 10, 1988, 102 Stat. 3585; Pub. L. 101–239, title VII, § 7811(c)(6), Dec. 19, 1989, 103 Stat. 2407; Pub. L. 104–188, title I, §§ 1301–1302(c), 1303, 1304, 1308(a), (b), (d)(1), 1315, 1316(a), (e), 1616(b)(15), Aug. 20, 1996, 110 Stat. 1777, 1779, 1782, 1783, 1785, 1786, 1857; Pub. L. 105–34, title XVI, § 1601(c)(1), (3), (4)(B), (C), Aug. 5, 1997, 111 Stat. 1087; Pub. L. 105–206, title VI, § 6007(f)(3), July 22, 1998, 112 Stat. 810; Pub. L. 106–554, § 1(a)(7) [title III, § 316(b)], Dec. 21, 2000, 114 Stat. 2763, 2763A–644; Pub. L. 108–357, title II, §§ 231(a), 232(a), 233(a), (b), 234(a), 236(a), 239(a), Oct. 22, 2004, 118 Stat. 1433–1435, 1437; Pub. L. 109–135, title IV, §§ 403(b), 413(a)(1), (c), Dec. 21, 2005, 119 Stat. 2620, 2641; Pub. L. 110–28, title VIII, §§ 8232(a), 8233(a), 8234(a), May 25, 2007, 121 Stat. 197, 198; Pub. L. 115–97, title I, § 13541(a), Dec. 22, 2017, 131 Stat. 2154; Pub. L. 115–141, div. U, title I, § 109(a), title IV, § 401(a)(190), (d)(1)(D)(xvi), Mar. 23, 2018, 132 Stat. 1171, 1193, 1208.)
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
- applicable date § 1361(c)(1)(B)(iii)
- C corporation § 1361(a)(2)
- electing small business trust § 1361(e)(1)(A)
- electing small business trust § 1361(e)(1)(B)
- estate § 1361(c)(3)
- ineligible corporation § 1361(b)(2)
- members of a family § 1361(c)(1)(B)(i)
- potential current beneficiary § 1361(e)(2)
- potential current beneficiary § 1361(e)(2)
- purchase § 1361(e)(1)(C)
- qualified subchapter S subsidiary § 1361(b)(3)(B)
- qualified subchapter S trust § 1361(d)(3)
- restricted bank director stock § 1361(f)(2)
- S corporation § 1361(a)(1)
- small business corporation § 1361(b)(1)
- straight debt § 1361(c)(5)(B)
Regulations under this section
Treasury regulations (26 CFR) issued under § 1361
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 21 other sections
- § 1362(a) Election; revocation; termination
- § 585 Reserves for losses on loans of banks
- § 351 Transfer to corporation controlled by transferor
- § 152(f)(1)(C) Dependent defined
- § 581 Definition of bank
- § 408(a) Individual retirement accounts
- § 408A Roth IRAs
- § 401(a) Qualified pension, profit-sharing, and stock bonus plans
- § 501(a) Exemption from tax on corporations, certain trusts, etc.
- § 678(a) Person other than grantor treated as substantial owner
- § 465 Deductions limited to amount at risk
- § 469 Passive activity losses and credits limited
- § 643(b) Definitions applicable to subparts A, B, C, and D
- § 663(c) Special rules applicable to sections 661 and 662
- § 170(c) Charitable, etc., contributions and gifts
- § 664(d) Charitable remainder trusts
- § 1012 Basis of property—cost
- § 641(c) Imposition of tax
- § 1368(f) Distributions
- § 368(c) Definitions relating to corporate reorganizations
- § 481 Adjustments required by changes in method of accounting
Cited by 7 Code sections
- § 280G(b)(5)(A)(i) Golden parachute payments
- § 512(e)(1) Unrelated business taxable income
- § 641(c)(5) Imposition of tax
- § 678(e) Person other than grantor treated as substantial owner
- § 856(m)(2)(A) Definition of real estate investment trust
- § 1362(b)(2)(B)(i) Election; revocation; termination
- § 1368(f) Distributions
Cited in 92 regulations not issued under it
- § 1.28-1 Credit for clinical testing expenses for certain drugs for rare diseases or conditions.
- § 1.41-7 Special rules.
- § 1.46-5 Qualified progress expenditures.
- § 1.48D-2 Definitions.
- § 1.56(g)-1 Adjusted current earnings.
- § 1.101-1 Exclusion from gross income of proceeds of life insurance contracts payable by reason of death.
- § 1.108-9 Application of the bankruptcy and the insolvency provisions of section 108 to grantor trusts and disregarded entities.
- § 1.108(i)-1 Deferred discharge of indebtedness income and deferred original issue discount deductions of C corporations.
- § 1.162-33 Certain employee remuneration in excess of $1,000,000 not deductible for taxable years beginning after December 31, 2017.
- § 1.163(j)-1 Definitions.
- § 1.170A-13 Recordkeeping and return requirements for deductions for charitable contributions.
- § 1.170A-14 Qualified conservation contributions.
- § 1.172-4 Net operating loss carrybacks and net operating loss carryovers.
- § 1.172-5 Taxable income which is subtracted from net operating loss to determine carryback or carryover.
- § 1.179-2 Limitations on amount subject to section 179 election.
- § 1.194-2 Amount of deduction allowable.
- § 1.224-1 Qualified tips.
- § 1.245A(d)-1 Disallowance of foreign tax credit or deduction.
- § 1.245A(e)-1 Special rules for hybrid dividends.
- § 1.250(a)-1 Deduction for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI).
- § 1.280G-1 Golden parachute payments.
- § 1.334-1 Basis of property received in liquidations.
- § 1.336-2 Availability, mechanics, and consequences of section 336(e) election.
- § 1.337(d)-6 New transitional rules imposing tax on property owned by a C corporation that becomes property of a RIC or REIT.
Show 68 more
- § 1.337(d)-7 Tax on property owned by a C corporation that becomes property of a RIC or REIT.
- § 1.338(h)(10)-1 Deemed asset sale and liquidation.
- § 1.362-3 Basis of importation property acquired in loss importation transaction.
- § 1.362-4 Basis of loss duplication property.
- § 1.367(a)-3 Treatment of transfers of stock or securities to foreign corporations.
- § 1.367(a)-7 Outbound transfers of property described in section 361(a) or (b).
- § 1.367(d)-1 Transfers of intangible property to foreign corporations.
- § 1.368-2 Definition of terms.
- § 1.409(p)-1 Prohibited allocation of securities in an S corporation.
- § 1.409(p)-1T Prohibited allocations of securities in an S corporation (temporary).
- § 1.421-1 Meaning and use of certain terms.
- § 1.441-3 Taxable year of a personal service corporation.
- § 1.444-2T Tiered structure (temporary).
- § 1.444-4 Tiered structure.
- § 1.448-2 Limitation on the use of the cash receipts and disbursements method of accounting for taxable years beginning after December 31, 2017.
- § 1.481-5 Eligible terminated S corporation.
- § 1.641(c)-1 Electing small business trust.
- § 1.645-1 Election by certain revocable trusts to be treated as part of estate.
- § 1.671-4 Method of reporting.
- § 1.701-1 Partners, not partnership, subject to tax.
- § 1.701-2 Anti-abuse rule.
- § 1.704-1 Partner's distributive share.
- § 1.752-2 Partner's share of recourse liabilities.
- § 1.860E-1 Treatment of taxable income of a residual interest holder in excess of daily accruals.
- § 1.865-2 Loss with respect to stock.
- § 1.902-1 Credit for domestic corporate shareholder of a foreign corporation for foreign income taxes paid by the foreign corporation.
- § 1.932-1 Coordination of United States and Virgin Islands income taxes.
- § 1.935-1 Coordination of individual income taxes with Guam and the Northern Mariana Islands.
- § 1.987-1 Scope, definitions, and special rules.
- § 1.1061-2 Applicable partnership interests and applicable trades or businesses.
- § 1.1248(f)-1 Certain nonrecognition distributions.
- § 1.1291-1 Taxation of U.S. persons that are shareholders of section 1291 funds.
- § 1.1362-1 Election to be an S corporation.
- § 1.1362-2 Termination of election.
- § 1.1362-3 Treatment of S termination year.
- § 1.1362-4 Inadvertent terminations and inadvertently invalid elections.
- § 1.1362-6 Elections and consents.
- § 1.1374-3 Net unrealized built-in gain.
- § 1.1374-8 Section 1374(d)(8) transactions.
- § 1.1377-1 Pro rata share.
- § 1.1400Z2(b)-1 Inclusion of gains that have been deferred under section 1400Z-2(a).
- § 1.1402(a)-2 Computation of net earnings from self-employment.
- § 1.1411-3 Application to estates and trusts.
- § 1.1445-2 Situations in which withholding is not required under section 1445(a).
- § 1.1502-76 Taxable year of members of group.
- § 1.1502-77 Agent for the group.
- § 1.1561-1 General rules regarding certain tax benefits available to the component members of a controlled group of corporations.
- § 1.1563-1 Definition of controlled group of corporations and component members and related concepts.
- § 1.6016-1 Declarations of estimated income tax by corporations.
- § 1.6045-1 Returns of information of brokers and barter exchanges.
- § 1.6045B-1 Returns relating to actions affecting basis of securities.
- § 1.6072-2 Time for filing returns of corporations.
- § 1.6417-1 Elective payment election of applicable credits.
- § 1.6418-1 Transfer of eligible credits.
- § 1.6418-2 Rules for making transfer elections.
- § 1.6418-3 Additional rules for partnerships and S corporations.
- § 1.6662-4 Substantial understatement of income tax.
- § 1.6662-5 Substantial and gross valuation misstatements under chapter 1.
- § 1.7872-5T Exempted loans (temporary).
- § 53.4968-3 Related organizations.
- § 301.6037-2 Required use of electronic form for returns of electing small business corporation.
- § 301.6221(b)-1 Election out for certain partnerships with 100 or fewer partners.
- § 301.6231(a)(1)-1 Exception for small partnerships.
- § 301.6231(a)(2)-1 Persons whose tax liability is determined indirectly by partnership items.
- § 301.7701-3 Classification of certain business entities.
- § 301.7701(i)-4 Special rules for certain entities.
- § 301.9100-6T Time and manner of making certain elections under the Deficit Reduction Act of 1984.
- § 301.9100-21 References to other temporary elections under various tax acts.
Amendment history
From the source credit and the official notes, newest first.
- Amended by Pub. L. 115–141Parts changed in 2018: (b)(2)(C) (c)(2)(B)(vi) (f)(2)
- Amended by Pub. L. 115–97Parts changed in 2017: (c)(2)(B)(v)
- Amended by Pub. L. 110–28Parts changed in 2007: (b)(3)(C) (f) (g)
- Amended by Pub. L. 109–135Parts changed in 2005: (b)(3)(A) (b)(3)(E) (c)(1) (c)(2)(A)(vi)
- Amended by Pub. L. 108–357Parts changed in 2004: (b)(1)(A) (b)(3)(A) (c)(1) (c)(2)(A)(vi) (c)(2)(B)(vi) (d)(1)(C) (e)(2)
- Amended by Pub. L. 106–554Parts changed in 2000: (e)(1)(A)(i)(IV)
- Amended by Pub. L. 105–206Parts changed in 1998: (e)(4)
- Amended by Pub. L. 105–34Parts changed in 1997: (b)(1)(B) (b)(3)(A) (c)(6) (e)(1)(B)(iii)
- Amended by Pub. L. 104–188Parts changed in 1996: (b)(1)(A) (b)(1)(B) (b)(2)(A) (b)(2)(B) (b)(2)(C) (b)(3) (c)(2)(A)(ii) (c)(2)(A)(iii) (c)(2)(A)(v) (c)(2)(B)(v) (c)(5)(B)(iii) (c)(6) (c)(7) (e) (e)(1)(A)(i)
- Amended by Pub. L. 101–239Parts changed in 1989: (b)(2)(B)
- Amended by Pub. L. 100–647Parts changed in 1988: (d)(3)
- Amended by Pub. L. 99–514Parts changed in 1986: (b)(2)(B) (d)(3)
- Amended by Pub. L. 98–369Parts changed in 1984: (c)(6) (d)(2)(B)(i) (d)(2)(D) (d)(3) (d)(4)
- Added by Pub. L. 97–354
Where it sits in the Code
- Subtitle A Income Taxes
- Chapter 1 NORMAL TAXES AND SURTAXES
- Subchapter S Tax Treatment of S Corporations and Their Shareholders
- Part I IN GENERAL
Nearby sections
- § 1361 S corporation defined
- § 1362 Election; revocation; termination
- § 1363 Effect of election on corporation
Official notes
The Law Revision Counsel's notes for this section (amendments, effective dates and related laws) are long, so they have their own page.