§ 1363. Effect of election on corporation
(a)
General rule
Except as otherwise provided in this subchapter, an S corporation shall not be subject to the taxes imposed by this chapter.
(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—
(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
Except as provided in paragraph (2), any election affecting the computation of items derived from an S corporation shall be made by the corporation.
(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
(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
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
Any increase in the tax imposed by this chapter by reason of this subsection shall be payable in 4 equal installments.
(B)
Date for payment of installments
The first installment under subparagraph (A) shall be paid on or before the due date (determined without regard to extensions) for the return of the tax imposed by this chapter for the last taxable year for which the corporation was a C corporation and the 3 succeeding installments shall be paid on or before the due date (as so determined) for the corporation’s return for the 3 succeeding taxable years.
(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
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—
(B)
Inventory assets
The term “inventory assets” means stock in trade of the corporation, or other property of a kind which would properly be included in the inventory of the corporation if on hand at the close of the taxable year.