[Code of Federal Regulations]
[Title 26, Volume 11]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.1362-5]

[Page 729]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.1362-5  Election after termination.

    (a) In general. Absent the Commissioner's consent, an S corporation 
whose election has terminated (or a successor corporation) may not make 
a new election under section 1362(a) for five taxable years as described 
in section 1362(g). However, the Commissioner may permit the corporation 
to make a new election before the 5-year period expires. The corporation 
has the burden of establishing that under the relevant facts and 
circumstances, the Commissioner should consent to a new election. The 
fact that more than 50 percent of the stock in the corporation is owned 
by persons who did not own any stock in the corporation on the date of 
the termination tends to establish that consent should be granted. In 
the absence of this fact, consent ordinarily is denied unless the 
corporation shows that the event causing termination was not reasonably 
within the control of the corporation or shareholders having a 
substantial interest in the corporation and was not part of a plan on 
the part of the corporation or of such shareholders to terminate the 
election.
    (b) Successor corporation. A corporation is a successor corporation 
to a corporation whose election under section 1362 has been terminated 
if--
    (1) 50 percent or more of the stock of the corporation (the new 
corporation) is owned, directly or indirectly, by the same persons who, 
on the date of the termination, owned 50 percent or more of the stock of 
the corporation whose election terminated (the old corporation); and
    (2) Either the new corporation acquires a substantial portion of the 
assets of the old corporation, or a substantial portion of the assets of 
the new corporation were assets of the old corporation.
    (c) Automatic consent after certain terminations. A corporation may, 
without requesting the Commissioner's consent, make a new election under 
section 1362(a) before the 5-year period described in section 1362(g) 
expires if the termination occurred because the corporation--
    (1) Revoked its election effective on the first day of the first 
taxable year for which its election was to be effective (see Sec. 
1.1362-2(a)(2)); or
    (2) Failed to meet the definition of a small business corporation on 
the first day of the first taxable year for which its election was to be 
effective (see Sec. 1.1362-2(b)(2)).

[T.D. 8449, 57 FR 55454, Nov. 25, 1992]

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