Section 1377 Election Clause Samples
A Section 1377 Election is a provision under U.S. tax law that allows S corporations to allocate income, losses, and other tax items among shareholders on a pro-rata, per-share, per-day basis when there is a change in ownership during the tax year. In practice, this means that if a shareholder sells or transfers their shares partway through the year, the corporation can elect to split the year's tax items between the old and new shareholders based on the exact period each held the shares, rather than using a default allocation method. This clause ensures a fair and precise allocation of tax responsibilities, preventing disputes and confusion when ownership changes occur mid-year.
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Section 1377 Election. Seller and Buyer hereby agree to make separate elections under Internal Revenue Code Section 1377 to terminate the taxable year of each Company as of the Closing Date, and to have the rules under Internal Revenue Code Section 1377(a)(2) applied as if the taxable year in which the Closing occurs consisted of two separate taxable years. Further, Buyer hereby agrees that it shall cause each Company to file said Section 1377 Election with the federal income tax return of the Company.
Section 1377 Election. Within the time period permitted under the Code, the parties hereto shall cause the Company to elect under Section 1377 of the Code to have the rules provided in Section 1377 of the Code applied as if the taxable year of the Company consisted of two taxable years, the first of which shall terminate as of the closing date, and to file all necessary documents to make such election with the Internal Revenue Service.
Section 1377 Election. Seller and ▇▇▇▇▇ hereby agree to elect under Internal Revenue Code Section 1377 to terminate the taxable year of the Company as of the Closing Date, and to have the rules under Internal Revenue Code Section 1377(a)(2) applied as if the [YEAR] taxable year consisted of two separate taxable years. Further, ▇▇▇▇▇ hereby agrees that it shall cause the Company to file said Section 1377 Election with the federal income tax return of the Company.]