Common use of Limitation on amount subject to tax Clause in Contracts

Limitation on amount subject to tax. For purposes of paragraph (h)(1) of this section, the taxable income limitation under § 1.1374–2(a)(2) is equal to the amount by which the S corporation’s net recognized built-in gain would have been increased from the year of the sale to the earlier of the year the in- come is reported under the installment method or the last year of the recogni- tion period, assuming all income from the sale had been reported in the year of the sale and all provisions of section 1374 applied. For purposes of the pre- ceding sentence, if the corporation sells the asset before the recognition period, the income from the sale that is not reported before the recognition pe- riod is treated as having been reported in the first year of the recognition pe- riod.