PUBLIC LAW 100-203—DEC. 22, 1987
101 STAT. 1330-395
SEC. 10205. CERTAIN FAKM CORPORATIONS REQUIRED TO USE ACCRUAL METHOD OF ACCOUNTING.
(a) GENERAL RULE.—Section 447 (relating to method of accounting for corporations engaged in farming) is amended by striking out subsections (c) and (e), by redesignating subsection (d) as subsection (e), and by inserting after subsection (b) the following new subsections: "(c) EXCEPTION FOR CERTAIN CORPORATIONS.—For purposes of subsection (a), a corporation shall be treated as not being a corporation if it is— "(1) an S corporation, or "(2) a corporation the gross receipts of which meet the requirements of subsection (d). „, "(d) GROSS RECEIPTS REQUIREMENTS.—
"(1) IN GENERAL.—A corporation meets the requirements of this subsection if, for each prior taxable year beginning after December 31, 1975, such corporation (and any predecessor corporation) did not have gross receipts exceeding $1,000,000. For purposes of the preceding sentence, all corporations which are members of the same controlled group of corporations (within the meaning of section 1563(a)) shall be treated as 1 corporation. "(2) SPECIAL RULES FOR FAMILY CORPORATIONS.—
"(A) IN GENERAL.—In the case of a family corporation, paragraph (1) shall be applied— "(i) by substituting 'December 31, 1985,' for 'December 31, 1975,'; and "(ii) by substituting '$25,000,000' for '$1,000,000'. "(B) GROSS RECEIPTS TEST.— "(i) CONTROLLED GROUPS.—Notwithstanding the last
sentence of paragraph (1), in the case of a family corporation— "(I) except as provided by the Secretary, only the applicable percentage of gross receipts of any other member of any controlled group of corporations of which such corporation is a member shall be taken '•'"/"' into account, and '•* "(II) under regulations, gross receipts of such corporation or of another member of such group '; ' " •' ^ shall not be taken into account by such corporation ^ ' more than once. "(ii) PASS-THRU ENTITIES.—For purposes of paragraph (1), if a family corporation holds directly or indirectly any interest in a partnership, estate, trust or other pass-thru entity, such corporation shall take into " account its proportionate share of the gross receipts of such entity. ^ "(iii) APPLICABLE PERCENTAGE.—For purposes of ' ^ clause (i), the term 'applicable percentage' means the percentage equal to a fraction— ^ "(I) the numerator of which is the fair market value of the stock of another corporation held directly or indirectly as of the close of the taxable "'" year by the family corporation, and " "(II) the denominator of which is the fair market value of all stock of such corporation as of such time.