Internal Revenue Code · 26 U.S.C.
§ 1371. Coordination with subchapter C
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. § 1371
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
- July 4, 2025 by Pub. L. 119–21
- Amendments
- 7 dated changes in the source credit
- Length
- 6 subsections · 692 words · about 3 min to read
- Cross-references
- cites 6; cited by 4 Code sections and 41 other regulations
- Regulations
- 3 issued under this section
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.
No carryforward, and no carryback, 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.
No carryforward, and no carryback, shall arise at the corporate level for a taxable year for which a corporation is an S corporation.
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 purposes of determining the number of taxable years to which an item may be carried back or carried forward.
In the case of any transaction involving the application of subchapter C to any S corporation, proper adjustment to any accumulated earnings and profits of the corporation shall be made.
Paragraph (1) shall not apply with respect to that portion of a distribution which is treated as a dividend under section 1368(c)(2).
Any election 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 50(a)(6).
Notwithstanding an election under section 1362, an S corporation shall continue to be liable for any increase in tax under section 49(b) or 50(a) attributable to credits allowed for taxable years for which such corporation was not an S corporation.
Paragraph (1) of subsection (c) shall not apply to any increase in tax under section 49(b) or 50(a) for which the S corporation is liable.
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 (within the meaning of section 1368(e)).
An S corporation may elect to have paragraph (1) not apply to all distributions made during a post-termination transition period described in section 1377(b)(1)(A). Such election shall not be effective unless all shareholders of the S corporation to whom distributions are made by the S corporation during such post-termination transition period consent to such election.
In the case of a distribution of money by an eligible terminated S corporation (as defined in section 481(d)) after the post-termination transition period, the accumulated adjustments account shall be allocated to such distribution, and the distribution shall be chargeable to accumulated earnings and profits, in the same ratio as the amount of such accumulated adjustments account bears to the amount of such accumulated earnings and profits.
(Added Pub. L. 97–354, § 2, Oct. 19, 1982, 96 Stat. 1681; amended Pub. L. 98–369, div. A, title VII, § 721(e), (o), (x)(3), July 18, 1984, 98 Stat. 967, 970, 971; Pub. L. 99–514, title XVIII, § 1899A(33), (34), Oct. 22, 1986, 100 Stat. 2960; Pub. L. 101–508, title XI, § 11813(b)(23), Nov. 5, 1990, 104 Stat. 1388–555; Pub. L. 104–188, title I, § 1310, Aug. 20, 1996, 110 Stat. 1784; Pub. L. 115–97, title I, § 13543(b), Dec. 22, 2017, 131 Stat. 2155; Pub. L. 117–167, div. A, § 107(b)(3)(C), Aug. 9, 2022, 136 Stat. 1398; Pub. L. 119–21, title VII, § 70513(b)(3)(B)(i), July 4, 2025, 139 Stat. 272.)
Regulations under this section
Treasury regulations (26 CFR) issued under § 1371
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 6 other sections
- § 1368(c)(2) Distributions
- § 1362 Election; revocation; termination
- § 50(a)(6) Other special rules
- § 49(b) At-risk rules
- § 1377(b)(1)(A) Definitions and special rule
- § 481(d) Adjustments required by changes in method of accounting
Cited by 4 Code sections
- § 1363(d)(5) Effect of election on corporation
- § 1374(b)(2) Tax imposed on certain built-in gains
- § 1377(b)(3)(B) Definitions and special rule
- § 6655(g)(4)(A)(iii) Failure by corporation to pay estimated income tax
Cited in 41 regulations not issued under it
- § 1.41-7 Special rules.
- § 1.44B-1 Credit for employment of certain new employees.
- § 1.46-1 Determination of amount.
- § 1.46-2 Carryback and carryover of unused credit.
- § 1.46-3 Qualified investment.
- § 1.46-4 Limitations with respect to certain persons.
- § 1.47-1 Recomputation of credit allowed by section 38.
- § 1.47-3 Exceptions to the application of § 1.47-1.
- § 1.47-4 Electing small business corporation.
- § 1.48-3 Used section 38 property.
- § 1.48-5 Electing small business corporations.
- § 1.50A-1 Determination of amount.
- § 1.50A-2 Carryback and carryover of unused credit.
- § 1.50A-3 Recomputation of credit allowed by section 40.
- § 1.50A-4 Exceptions to the application of § 1.50A-3.
- § 1.50A-5 Electing small business corporations.
- § 1.50B-2 Electing small business corporations.
- § 1.53-2 Carryback and carryover of unused credit.
- § 1.57-0 Scope.
- § 1.57-1 Items of tax preference defined.
- § 1.170A-4A Special rule for the deduction of certain charitable contributions of inventory and other property.
- § 1.172-1 Net operating loss deduction.
- § 1.381(c)(23)-1 Investment credit carryovers in certain corporate acquisitions.
- § 1.613A-4 Limitations on application of § 1.613A-3 exemption.
Show 17 more
- § 1.613A-7 Definitions.
- § 1.615-4 Limitation of amount deductible.
- § 1.617-2 Limitation on amount deductible.
- § 1.992-1 Requirements of a DISC.
- § 1.1016-5 Miscellaneous adjustments to basis.
- § 1.1251-2 Excess deductions account.
- § 1.1362-2 Termination of election.
- § 1.6037-1 Return of electing small business corporation.
- § 3.0 Statutory provisions; section 607, Merchant Marine Act, 1936, as amended.
- § 3.6 Tax treatment of qualified withdrawals.
- § 7.48-2 Election of forty-percent method of determining investment credit for movie and television films placed in service in a taxable year beginning before January 1, 1975.
- § 18.1379-1 Transitional rules on enactment.
- § 301.6362-5 Qualified nonresident tax.
- § 301.6362-7 Additional requirements.
- § 301.9100-4T Time and manner of making certain elections under the Economic Recovery Tax Act of 1981.
- § 301.9100-6T Time and manner of making certain elections under the Deficit Reduction Act of 1984.
- § 301.9100-20T Election to treat certain distributions as made on the last day of the taxable year.
Amendment history
From the source credit and the official notes, newest first.
- Amended by Pub. L. 119–21Parts changed in 2025: (d)(1)
- Amended by Pub. L. 117–167Parts changed in 2022: (d)(1)
- Amended by Pub. L. 115–97Parts changed in 2017: (f)
- Amended by Pub. L. 104–188Parts changed in 1996: (a)
- Amended by Pub. L. 101–508Parts changed in 1990: (d)(1) (d)(2)
- Amended by Pub. L. 99–514Parts changed in 1986: (e)(1) (e)(2)
- Amended by Pub. L. 98–369Parts changed in 1984: (c)(1) (d)(3) (e) (e)(2)
- 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 III SPECIAL RULES
Nearby sections
- § 1371 Coordination with subchapter C
- § 1372 Partnership rules to apply for fringe benefit purposes
- § 1373 Foreign income
- § 1374 Tax imposed on certain built-in gains
- § 1375 Tax imposed when passive investment income of corporation having accumulated earnings and profits exceeds 25 percent of gross receipts
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
Prior Provisions
A prior section 1371, added Pub. L. 85–866, title I, § 64(a), Sept. 2, 1958, 72 Stat. 1650; amended Pub. L. 86–376, § 2(a), Sept. 23, 1959, 73 Stat. 699; Pub. L. 88–272, title II, § 233(a), Feb. 26, 1964, 78 Stat. 112; Pub. L. 94–455, title IX, § 902(a)(1), (2), (c)(1), (2), Oct. 4, 1976, 90 Stat. 1608, 1609; Pub. L. 95–600, title III, §§ 341, 342, title VII, § 701(y)(1), Nov. 6, 1978, 92 Stat. 2843, 2921; Pub. L. 96–589, § 5(d), Dec. 24, 1980, 94 Stat. 3406; Pub. L. 97–34, title II, §§ 233(a), 234(a), (b), Aug. 13, 1981, 95 Stat. 250, 251; Pub. L. 97–448, title I, § 102(i)(1), Jan. 12, 1983, 96 Stat. 2372, related to definitions applicable to election of small business corporations as to taxable status, prior to the general revision of this subchapter by section 2 of Pub. L. 97–354.
Amendments
2025—Subsec. (d)(1). Pub. L. 119–21 substituted “section 50(a)(6)” for “section 50(a)(5)”.
2022—Subsec. (d)(1). Pub. L. 117–167 substituted “section 50(a)(5)” for “section 50(a)(4)”.
2017—Subsec. (f). Pub. L. 115–97 added subsec. (f).
1996—Subsec. (a). Pub. L. 104–188 reenacted heading without change and amended text generally. Prior to amendment, text read as follows:
“(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.”
1990—Subsec. (d)(1). Pub. L. 101–508, § 11813(b)(23)(A), substituted “section 50(a)(4)” for “section 47(b)”.
Subsec. (d)(2), (3). Pub. L. 101–508, § 11813(b)(23)(B), substituted “section 49(b) or 50(a)” for “section 47”.
1986—Subsec. (e)(1). Pub. L. 99–514, § 1899A(33), inserted “(within the meaning of section 1368(e))”.
Subsec. (e)(2). Pub. L. 99–514, § 1899A(34), struck out “(within the meaning of section 1368(e))” after “to such election”.
1984—Subsec. (c)(1). Pub. L. 98–369, § 621(e)(2), substituted “paragraphs (2) and (3) and subsection (d)(3)” for “paragraphs (2) and (3)”.
Subsec. (d)(3). Pub. L. 98–369, § 721(e)(1), added par. (3).
Subsec. (e). Pub. L. 98–369, § 721(o), amended subsec. (e) generally, designating existing provisions as par. (1) and adding par. (2).
Subsec. (e)(2). Pub. L. 98–369, § 721(x)(3), inserted “(within the meaning of section 1368(e))”.
Statutory Notes and Related Subsidiaries
Effective Date of 2025 Amendment
Amendment by Pub. L. 119–21 applicable to taxable years beginning after July 4, 2025, see section 70513(g)(1) of Pub. L. 119–21, set out in a note under section 48 of this title.
Effective Date of 2022 Amendment
Amendment by Pub. L. 117–167 applicable to property placed in service after Dec. 31, 2022, and, for any property the construction of which begins prior to Jan. 1, 2023, only to the extent of the basis thereof attributable to the construction, reconstruction, or erection after Aug. 9, 2022, see section 107(f) of Pub. L. 117–167, set out as a note under section 905 of Title 2, The Congress.
Effective Date of 1996 Amendment
Amendment by Pub. L. 104–188 applicable to taxable years beginning after Dec. 31, 1996, see section 1317(a) of Pub. L. 104–188, set out as a note under section 641 of this title.
Effective Date of 1990 Amendment
Amendment by Pub. L. 101–508 applicable to property placed in service after Dec. 31, 1990, but not applicable to any transition property (as defined in section 49(e) of this title), any property with respect to which qualified progress expenditures were previously taken into account under section 46(d) of this title, and any property described in section 46(b)(2)(C) of this title, as such sections were in effect on Nov. 4, 1990, see section 11813(c) of Pub. L. 101–508, set out as a note under section 45K of this title.
Effective Date of 1984 Amendment
Amendment by Pub. L. 98–369 effective as if included in the Subchapter S Revision Act of 1982, Pub. L. 97–354, see section 721(y)(1) of Pub. L. 98–369, set out as a note under section 1361 of this title.
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1982, see section 6(a) of Pub. L. 97–354, set out as a note under section 1361 of this title.
Savings Provision
For provisions that nothing in amendment by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.