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TITLE 26-INTERNAL REVENUE CODE § 1372. Election by small business corporation (a) Eligibility Except as provided in subsection (f), any small business corporation may elect, in accor- dance with the provisions of this section, not to be subject to the taxes imposed by this chapter. Such election shall be valid only if all persons who are shareholders in such corporation- (1) on the first day of the first taxable year for which such election is effective, if such election is made on or before such first day, or (2) on the day on which the election is made, if the election is made after such first day, consent to such election. (b) Effect If a small business corporation makes an elec- tion under subsection (a). then- (1) with respect to the taxable years of the corporation for which such election is in effect, such corporation shall not be subject to the taxes imposed by this chapter (other than as provided by section 58(d)(2) and by section 1378) and, with respect to such tax- able years and all succeeding taxable years, the provisions of section 1377 shall apply to such corporation, and (2) with respect to the taxable years of a shareholder of such corporation in which or with which the taxable years of the corpora- tion for which such election is in effect and, the provisions of sections 1373, 1374, and 1375 shall apply to such shareholder, and with re- spect to such taxable years and all succeeding taxable years, the provisions of section 1376 shall apply to such shareholder. (c) Where and how made An election under subsection (a) may be made by a small business corporation for any taxable year at any time during the first month of such taxable year, or at any time during the month preceding such first month. Such election shall be made in such manner as the Secretary shall prescribe by regulations. (d) Years for which effective An election under subsection (a) shall be ef- fective for the taxable year of the corporation for which it is made and for all succeeding tax- able years of the corporation, unless it is termi- nated, with respect to any such taxable year, under subsection (e). (e) Termination (1) New shareholders (A) An election under subsection (a) made by a small business corporation shall termi- nate if any person who was not a share- holder in such corporation- (i) on the first day of the first taxable year of the corporation for which the election Is effective, if such election is made on or before such first day, or (ii) on the day on which the election is made, if such election is made after such first day, becomes a shareholder in such corporation and affirmatively refuses (in such manner as the Secretary shall by regulations pre- scribe) to consent to such election on or before the 60th day after the day on which he acquires the stock. (B) If the person acquiring the stock is the estate of a decedent, the period under subparagraph (A) for affirmatively refusing to consent to the.election shall expire on the 60th day after whichever of the follow- ing is the earlier: (1) The day on which the executor or ad- ministrator of the estate qualifies; or (ii) The last day of the taxable year of the corporation ,in which the decedent died. (C) Any termination of an election under subparagraph (A) by reason of the affirma- tive refusal of any person to consent to such election shall be effective for the taxable year of the corporation in which such person becomes a shareholder in the corpo- ration and for all succeeding taxable years of the corporation. (2) Revocation An election under subsection (a) made by a small business corporation may be revoked by it for any taxable year of the corporation after the first taxable year for which the elec- tion Is effective. An election may be revoked only if all persons who are shareholders in the corporation on the day on which the re- vocation is made consent to the revocation. A revocation under this paragraph shall be ef- fective- (A) for the taxable year in which made, if made before the close of the first month of such taxable year,. (B) for the taxable year following the tax- able year in which made, if made after the close of such first month, and for all succeeding taxable years of the corporation. Such revocation shall be made in such manner as the Secretary shall prescribe by regulations. (3) Ceases to be small business corporation An election under subsection (a) made by a small business corporation shall terminate if at any time- I (A) after the first day of the first taxable year of the corporation for which the elec- tion is effective, If such election is made on or before such first day, or (B) after the day on which the election is made, if such election is made after such first day, the corporation ceases to be a small business corporation (as defined in section 1371(a)). Such termination shall be effective for the taxable year of the corporation in which the corporation ceases to be a small business cor- poration and for all succeeding taxable years of the corporation. (4) Foreign income An election under subsection (a) made by a small business corporation shall terminate If for any taxable year of the corporation for which the election is in effect, such corpora- tion derives more than 80 percent of Its gross receipts from sources outside the United States. Such termination shall be effective for the taxable year of the corporation in which It derives more than 80 percent of Its § 1372 Page 732