Common use of Corporation with subchapter C and subchapter S earnings and profits Clause in Contracts

Corporation with subchapter C and subchapter S earnings and profits. If an S corporation that makes the election provided in this paragraph (f)(2) has both subchapter C earnings and profits (as defined in section 1362(d)(3)(B)) and subchapter S earnings and profits in a taxable year of the corporation in which the distribution is made, the dis- tribution is treated as made first from subchapter C earnings and profits, and second from subchapter S earnings and profits. Subchapter S earnings and prof- its are earnings and profits accumu- lated in a taxable year beginning be- fore January 1, 1983 (or in the case of a qualified casualty insurance electing small business corporation or a quali- fied oil corporation, earnings and prof- its accumulated in any taxable year), for which an election under subchapter S of chapter 1 of the Internal Revenue Code was in effect. (3) Election to make a deemed dividend. An S corporation may elect under this paragraph (f)(3) to distribute all or part of its subchapter C earnings and profits through a deemed dividend. If an S cor- poration makes the election provided in this paragraph (f)(3), the S corpora- tion will be considered to have made the election provided in paragraph (f)(2) of this section (relating to the election to distribute earnings and profits first). The amount of the deemed dividend may not exceed the subchapter C earnings and profits of the corporation on the last day of the taxable year, reduced by any actual distributions of subchapter C earnings and profits made during the taxable year. The amount of the deemed divi- dend is considered, for all purposes of the Internal Revenue Code, as if it were distributed in money to the share- holders in proportion to their stock ownership, received by the share- holders, and immediately contributed by the shareholders to the corporation, all on the last day of the corporation’s taxable year. (4) Election to forego previously taxed income. An S corporation may elect to forego distributions of previously taxed income. If such an election is made, paragraph (d)(2) of this section (relat- ing to corporations with previously taxed income) does not apply to any distribution made during the taxable year. Thus, distributions by a corpora- tion that makes the election to forego previously taxed income for a taxable year under this paragraph (f)(4) and does not make the election to dis- tribute earnings and profits first under paragraph (f)(2) of this section are treated in the manner provided in sec- tion 1368(c) (relating to distributions by corporations with earnings and prof- its). Distributions by a corporation that makes both the election to dis- tribute earnings and profits first under paragraph (f)(2) of this section and the election to forego previously taxed in- come under this paragraph (f)(4), are treated in the manner provided in para- graph (f)(2)(i) of this section. (5) Time and manner of making elec- tions—