PUBLIC LAW 97-354—OCT. 19, 1982
96 STAT. 1675
from the active and regular conduct of a lending or finance business (as defined in section 542(d)(l))"(iv) TREATMENT OF CERTAIN LIQUIDATIONS.—Gross
receipts derived from sales or exchanges of stock or securities shall not include amounts received by an S corporation which are treated under section 331 (relating to corporate liquidations) as payments in exchange for stock where the S corporation owned more than 50 percent of each class of stock of the liquidating corporation. "(e) TREATMENT OF S TERMINATION YEAR.—
"(1) IN GENERAL.—In the case of an S termination year, for purposes of this title— "(A) S SHORT YEAR.—The portion of such year ending before the 1st day for which the termination is effective shall be treated as a short taxable year for which the corporation is an S corporation. "(B) C SHORT YEAR.—The portion of such year beginning on such 1st day shall be treated as a short taxable year for which the corporation is a C corporation. "(2) PRO RATA ALLOCATION.—Except as provided in paragraph
(3), the determination of which items are to be taken into account for each of the short taxable years referred to in paragraph (1) shall be made— "(A) first by determining for the S termination year— "(i) the amount of each of the items of income, loss, deduction, or credit described in section 1366(a)(1)(A), Post, p. 1677. and "(ii) the amount of the nonseparately computed income or loss, and "(B) then by assigning an equal portion of each amount determined under subparagraph (A) to each day of the S termination year. "(3) ELECTION TO HAVE ITEMS ASSIGNED TO EACH SHORT TAXABLE YEAR UNDER NORMAL TAX ACCOUNTING RULES.—
"(A) IN GENERAL.—A corporation may elect to have paragraph (2) not apply. "(B) ALL SHAREHOLDERS MUST CONSENT TO ELECTION.—
An election under this paragraph shall be valid only if all persons who are shareholders in the corporation at any time during the S termination year consent to such election. "(4) S TERMINATION YEAR.—For purposos of this subsection, the term 'S termination year' means any taxable year of a corporation (determined without regard to this subsection) in which a termination of an election made under subsection (a) takes effect (other than on the 1st day thereof). "(5) TAX FOR C SHORT YEAR DETERMINED ON ANNUAUZED
BASIS.—
"(A) IN GENERAL.—The taxable income for the short year described in subparagraph (B) of paragraph (1) shall be placed on an annual basis by multiplying the taxable income for such short year by the number of days in the S termination year and by dividing the result by the number of days in the short year. The tax shall be the same part of the tax computed on the annual basis as the number of
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