[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: 26CFR1.1378-1]

[Page 782-783]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.1378-1  Taxable year of S corporation.

    (a) In general. The taxable year of an S corporation must be a 
permitted year. A permitted year is the required taxable year (i.e., a 
taxable year ending on December 31), a taxable year elected under 
section 444, a 52-53-week taxable year ending with reference to the 
required taxable year or a taxable year elected under section 444, or 
any other taxable year for which the corporation establishes a business 
purpose to the satisfaction of the Commissioner under section 442.
    (b) Adoption of taxable year. An electing S corporation may adopt, 
in accordance with Sec. 1.441-1(c), its required taxable year, a 
taxable year elected under section 444, or a 52-53-week taxable year 
ending with reference to its required taxable year or a taxable year 
elected under section 444 without the approval of the Commissioner. See 
Sec. 1.441-1. An electing S corporation that wants to adopt any other 
taxable year, must establish a business purpose and obtain the approval 
of the Commissioner under section 442.
    (c) Change in taxable year--(1) Approval required. An S corporation 
or electing S corporation that wants to change its taxable year must 
obtain the approval of the Commissioner under section 442 or make an 
election under section 444. However, an S corporation or electing S 
corporation may obtain automatic approval for certain changes, including 
a change to its required taxable year, pursuant to administrative 
procedures published by the Commissioner.
    (2) Short period tax return. An S corporation or electing S 
corporation that changes its taxable year must make its return for a 
short period in accordance with section 443, but must not annualize the 
corporation's taxable income.
    (d) Retention of taxable year. In certain cases, an S corporation or 
electing S corporation will be required to change its taxable year 
unless it obtains the approval of the Commissioner under section 442, or 
makes an election under section 444, to retain its current taxable year. 
For example, a corporation using a June 30 fiscal year that elects to be 
an S corporation and, as a result, is required to use the calendar

[[Page 783]]

year must obtain the approval of the Commissioner to retain its current 
fiscal year.
    (e) Procedures for obtaining approval or making a section 444 
election--(1) In general. See Sec. 1.442-1(b) for procedures to obtain 
the approval of the Commissioner (automatically or otherwise) to adopt, 
change, or retain a taxable year. See Sec. Sec. 1.444-1T and 1.444-2T 
for qualifications, and 1.444-3T for procedures, for making an election 
under section 444.
    (2) Special rules for electing S corporations. An electing S 
corporation that wants to adopt, change to, or retain a taxable year 
other than its required taxable year must request approval of the 
Commissioner on Form 2553, ``Election by a Small Business Corporation,'' 
when the election to be an S corporation is filed pursuant to section 
1362(b) and Sec. 1.1362-6. See Sec. 1.1362-6(a)(2)(i) for the manner 
of making an election to be an S corporation. If such corporation 
receives permission to adopt, change to, or retain a taxable year other 
than its required taxable year, the election to be an S corporation will 
be effective. Denial of the request renders the election ineffective 
unless the corporation agrees that, in the event the request to adopt, 
change to, or retain a taxable year other than its required taxable year 
is denied, it will adopt, change to, or retain its required taxable year 
or, if applicable, make an election under section 444.
    (f) Effective date. The rules of this section are applicable for 
taxable years ending on or after May 17, 2002.

[T.D. 8996, 67 FR 35024, May 17, 2002]

             Section 1374 Before the Tax Reform Act of 1986