Page 423 - Small Business IRS Training Guides

For more information see the Distributions and the Post-Termination Transition Period and After the Post-Termination

Transition Period discussion in the S Corporation Distributions Issue Guide.

Audit Considerations

Both changes made by the provision are generally taxpayer favorable. However, they apply to specific C corporations that
had converted from S corporation status during a particular period of time. If it is determined the taxpayer has relied on

these provisions, the following should be verified:

• The entity was an S corporation on December 21, 2017,

• The S corporation revoked its election under section 1362(a) during the two-year period beginning December 22,

2017, and

• has all of same owners (and in identical proportions) on the date the S corporation election is revoked as on
December 22, 2017.

Summary

Main Points

The law change provides a temporary rule for certain taxpayers when an S corporation converts to a C corporation.

• Changes from cash to accrual method of accounting may be reported ratably during the six-taxable-year period

beginning with the year of change. Rev. Proc. 2018-44 provides additional guidance to taxpayers.

• Additional nondividend distributions may be provided by eligible terminated S corporations even after the post
termination transition period ends. Additional guidance is pending.

73233-102 13543-6 Tax Cuts and Jobs Act