(i) section 1368, relating to distributions of property made with respect to an S corporation's stock;

(ii) section 1371(e), relating to cash distributions during a post-termination transition period; and

(iii) section 1379(c), relating to transitional rules for distributions of undistributed taxable income; to the extent any of the above distributions represent income not previously subject to the New York State personal income tax because the election to be treated as a New York S corporation under section 660(a) of the Tax Law had not been made.

(2) Any of the above distributions, which are treated as gains from the sale or exchange of property (as described under section 1368[b][2] of the Internal Revenue Code) for Federal income tax purposes, must be treated as ordinary income for New York State personal income tax purposes.

(3) Exception. A resident shareholder of an S corporation that cannot make the election provided for under section 660(a) of the Tax Law ( e.g., a foreign S corporation [ i.e., an S corporation that is not incorporated in New York State] that does not do business in New York State or an S corporation that is taxed under article 9 of the Tax Law), is not required to make the modification referred to in this subdivision.