§ 1371. Coordination with subchapter C
(a)
Application of subchapter C rules
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.
(b)
No carryover between C year and S year
(1)
From C year to S year
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.
(c)
Earnings and profits
(1)
In general
Except as provided in paragraphs (2) and (3) and subsection (d)(3), no adjustment shall be made to the earnings and profits of an S corporation.
(d)
Coordination with investment credit recapture
(e)
Cash distributions during post-termination transition period
(1)
In general
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)).
(2)
Election to distribute earnings first
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.