Category: Tax Returns, Examinations &
IRS Procedure; Corporations Copyright 1998, The Tax Resource Group. All rights reserved. Telephone 800-578-3498. Internet: www.taxresourcegroup.com The sole issue is whether an S corporation with a valid Section 444 election can terminate that election and file tax returns based on the required tax year (the calendar year in this case) without permission of the IRS. The law clearly provides that a taxpayer with a Section 444 election in place can unilaterally terminate the election and file returns on the basis of the required year. See Section 444(d)(2)(A). The regulations at Section 1.444-1T(a)(5)(ii)(A) provide that the termination of the Section 444 election is effective as of the first day of the short period necessitated by the change to the required tax year. The regulations further provide that in the case of a termination that results in a short taxable year, an income tax return is required for the short period. In order to allow the Service to process the affected income tax return in an efficient manner, a partnership, S corporation, or personal service corporation that files such a short period return should type or legibly print at the top of the first page of the income tax return for the short taxable year -- "SECTION 444 ELECTION TERMINATED." |
