110 STAT. 1784
PUBLIC LAW 104-188—AUG. 20, 1996
(1) by striking "as provided in subparagraph (B)" and
inserting "as otherwise provided in this paragraph", and
(2) by striking "section 1367(b)(2)(A)" and inserting "section
1367(a)(2)".
SEC. 1310. TREATMENT OF S CORPORATIONS UNDER SUBCHAPTER C.
Subsection (a) of section 1371 (relating to appHcation of subchapter C rules) is amended to read as follows:
" (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.".
26 USC 1361
SEC. 1311. ELIMD^ATION OF CERTAIN EARNINGS AND PROFITS.
(a) IN GENERAL.— If —
(1) a corporation was an electing small business corporation
under subchapter S of chapter 1 of the Internal Revenue Code
of 1986 for any taxable year beginning before January 1, 1983,
and
(2) such corporation is an S corporation under subchapter
S of chapter 1 of such Code for its first taxable year beginning
after December 31, 1996,
the amount of such corporation's accumulated earnings and profits
(as of the beginning of such first taxable year) shall be reduced
by an amount equal to the portion (if any) of such accumulated
earnings and profits which were accumulated in any taxable year
beginning before January 1, 1983, for which such corporation was
an electing small business corporation under such subchapter S.
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (3) of section 1362(d), as amended by section
1308, is amended—
(A) by striking "SUBCHAPTER C" in the paragraph heading and inserting "ACCUMULATED",
(B) by striking "subchapter C" in subparagraph (A)(i)(I)
and inserting "accumulated", and
(C) by striking subparagraph (B) and redesignating
the following subparagraphs accordingly.
(2)(A) Subsection (a) of section 1375 is amended by striking
"subchapter C" in paragraph (1) and inserting "accumulated".
(B) Paragraph (3) of section 1375(b) is amended to read
as follows:
"(3) PASSIVE INVESTMENT INCOME, ETC.— The terms 'passive
investment income' and 'gross receipts' have the same respective meamings as when used in paragraph (3) of section
1362(d).".
(C) The section heading for section 1375 is amended by
striking "subchapter C" and inserting "accumulated".
(D) The table of sections for part III of subchapter S of
chapter 1 is amended by striking "subchapter C" in the item
relating to section 1375 and inserting "accumulated".
(3) Clause (i) of section 1042(c)(4)(A) is amended by striking
"s ection 1362(d)(3)(D)" and inserting "section 1362(d)(3)(C)".
SEC. 1312. CARRYOVER OF DISALLOWED LOSSES AND DEDUCTIONS
UNDER AT-RISK RULES ALLOWED.
Paragraph (3) of section 1366(d) (relating to carryover of disallowed losses and deductions to post-termination transition period)
is amended by adding at the end the following new subparagraph:
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