Internal Revenue Code section 1362

Internal Revenue Code section 1362
Name	Internal Revenue Code section 1362
Type	Statutory provision
Jurisdiction	United States
Enacted	Internal Revenue Code of 1986
Topic	Taxation

Internal Revenue Code section 1362 Internal Revenue Code section 1362 governs the election mechanism allowing certain small business entities to be taxed under Subchapter S, linking Small Business Administration practices to Internal Revenue Code of 1986 administration, and affecting relationships among stakeholders such as Small Business Investment Company, Securities and Exchange Commission, Federal Reserve System, Department of the Treasury. The provision intersects with landmark tax events like the Tax Reform Act of 1986, Revenue Act of 1913, and administrative precedents involving the Internal Revenue Service and United States Tax Court. It shapes corporate forms referenced in cases involving United States Supreme Court decisions, Deloitte, and Ernst & Young analyses.

Overview and Purpose

Internal Revenue Code section 1362 authorizes a qualified corporation to elect a specialized tax status under provisions related to Subchapter S Corporation structures, influencing transactions considered by Congress, House Committee on Ways and Means, Senate Finance Committee, Office of Management and Budget, and advisors from PricewaterhouseCoopers and KPMG. Its purpose aligns with legislative goals seen in the Tax Reform Act of 1986 and administrative interpretations from the Internal Revenue Service and guidance cited by the United States Tax Court and Court of Appeals for the Federal Circuit. The section provides a framework for pass-through taxation conversations involving entities such as Chamber of Commerce, National Federation of Independent Business, and financial analyses by Bloomberg L.P., The Wall Street Journal, and The New York Times.

Eligibility and Election Requirements

Eligibility under Internal Revenue Code section 1362 requires the corporation to meet shareholder, entity, and class limitations informed by precedents from Dunlop v. United States, commentary by American Institute of Certified Public Accountants, and rulings involving United States Tax Court. Shareholder restrictions reference entities including Estates, Trusts, and partnerships delineated with input from Federal Reserve Board discussions and legal treatises from scholars at Harvard Law School, Yale Law School, and Columbia Law School. Election procedures interact with administrative forms issued by the Internal Revenue Service and regulatory guidance from the Treasury Department and practitioners at firms like Baker McKenzie and Skadden, Arps, Slate, Meagher & Flom. Deadlines and consent mechanics echo concerns raised in reports by Government Accountability Office and analyses in journals like Tax Notes and The Journal of Taxation.

Tax Treatment and Operational Rules

Once elected under Internal Revenue Code section 1362, a corporation is treated for federal income tax purposes in ways that affect taxable income allocation, distributions, and basis adjustments referenced in cases from the United States Court of Appeals for the Ninth Circuit and doctrine developed in opinions from the United States Supreme Court. Operational rules govern treatment of items such as passive income, built-in gains, and capital loss carryovers, topics addressed by commentators at Brookings Institution, American Bar Association, and advisory memoranda produced by Ernst & Young. Interactions with other tax provisions like the Internal Revenue Code section 1374 and Internal Revenue Code section 1366 are frequently cited in guidance by the Internal Revenue Service and rulings from the Tax Court and District Court for the Southern District of New York.

Termination and Revocation of S Corporation Status

Termination mechanisms under Internal Revenue Code section 1362 include automatic terminations, shareholder consents, and revocation elections studied in litigation before the United States Tax Court and appellate panels of the United States Court of Appeals for the Federal Circuit. High-profile corporate reorganizations analyzed by Securities and Exchange Commission filings and advisory opinions from the Treasury Department illustrate the practical effects of termination, which can implicate events such as mergers overseen by the Federal Trade Commission and restructuring strategies discussed at Columbia Business School and Wharton School. Revocations influence subsequent tax treatments considered in rulings cited by PricewaterhouseCoopers and KPMG technical alerts.

Special Issues and Exceptions

Special issues under Internal Revenue Code section 1362 include treatment of inadvertent elections, late filings, and relief provisions influenced by precedents in United States Tax Court holdings and memoranda from the Internal Revenue Service. Exceptions for certain trusts, tax-exempt shareholders, and nonresident aliens draw on statutory language and advisory interpretations from Treasury Regulations, legal commentary from Harvard Law Review, and technical guidance issued by IRS Chief Counsel. Cross-references to related provisions, such as those affecting built-in gains and passive investment income, are routinely analyzed by practitioners at Deloitte, Ernst & Young, and academics at New York University School of Law.

Administrative Procedures and Compliance

Administrative procedures for elections, filings, and compliance under Internal Revenue Code section 1362 are implemented through forms and notices issued by the Internal Revenue Service and monitored by oversight bodies like the Government Accountability Office and panels in the United States Senate Finance Committee. Compliance practices involve accounting firms such as Ernst & Young, KPMG, Deloitte, and PricewaterhouseCoopers, and are taught in curricula at Georgetown University Law Center and Northwestern University Pritzker School of Law. Dispute resolution and audit protocols reflect case law from the United States Tax Court, enforcement actions by the Internal Revenue Service Criminal Investigation division, and commentary in periodicals like Tax Notes and The Tax Adviser.

Category:United States federal taxation law