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TITLE 26-INTERNAL REVENUE CODE "(2) within one year after the date of enactment of this Act [Jan. 12, 19711 and in such manner as the Secretary of the Treasury or his delegate prescribes by regulations- "(A) the corporation elects to have such amend- ment so apply, and "(B) all persons (or their personal representa- tives) who were shareholders of such corporation at any time during any taxable year beginning with the first taxable year to which this amend- ment applies and ending on or before the date of the enactment of this Act [Jan. 12, 1971] consent to such election and to the application of the amendment made by subsection (a). "(c) If the assessment of any deficiency in income tax resulting from the filing of such election for a tax- able year ending before the date of such filing is pre. vented before the expiration of one year after the date of such filing by any law or rule of law, such deficien- cy (to the extent attributable to such election) may be assessed at any time prior to the expiration of such one-year period notwithstanding any law or rule of law which would otherwise prevent such assessment." EFFECTIVE DATE OF 1966 AimENmrr Amendment of subsec. (b)(1) by Pub. L. 89-389 appli- cable with respect to taxable years of electing small business corporations beginning after April 14, 1966, but not applicable with respect to sales or exchanges occurring before February 24, 1966, see section 2(c) of Pub. L. 89-389, set out as an Effective Date note under section 1378 of this title. Section 3(b) of Pub. L. 89-389 provided that: "The amendment made by subsection (a) [amending subsec. (e)(5) of this section] shall apply to taxable years of electing small business corporations ending after the date of the enactment of this Act. Such amendment shall also apply with respect to taxable years beginning after December 31, 1962, and ending on or before such date of enactment, if (at such time and in such manner as the Secretary of the Treasury or his delegate prescribes by regulations)- "(1) the corporation elects to have such amend- ment so apply, and "(2) all persons (or their personal representatives) who were shareholders of such corporation at any time during any taxable year beginning after De- cember 31, 1962, and ending on or before the date of the enactment of this Act [Apr. 14, 1966), consent to such election and to the application of the amend- ment made by subsection (a)." EneECTIVE DATE Section applicable only with respect to taxable years beginning after Dec. 31, 1957, see section 64(e) of Pub. L. 85-866, set out as Effective Date of 1958 Amend- ment note under section 172 of this title. PREVENTION OF DENIAL OF SUBMcAITER S STATUS Section l(d) of Pub. L. 91-683 provided that: "If the election of a corporation under subsection (a) of section 1372 of the Internal Revenue Code of 1954 [subsec. (a) of this section] would have been terminat- ed because of the application of subsection (e)(5) of such section (before the amendment made by subsec- tion (a) of this section) but for the election by such corporation under paragraph (2) of subsection (b) [set out as a note under this section] (and the consent of shareholders under such paragraph), such election under section 1372(a) of such code shall not be treated as terminated for any year beginning before the date of the enactment of thz Act [Jan. 12, 1971] as a result of- "(1) such corporation filing its income tax return on a form 1120 (instead of a form 1120S), or "(2) a new shareholder not consenting to such elec- tion of such corporation in accordance with the re- quirements of subsection (e)(1) of such section 1372." SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 1371, 1378 of this title. §1373. Corporation undistributed taxable income taxed to shareholders (a) General rule The undistributed taxable income of an elect- ing small business corporation for any taxable year shall be included in the gross income of the shareholders of such corporation in the manner and to the extent set forth in this sec- tion. (b) Amount included in gross income Each person who is a shareholder of an elect- ing small business corporation on the last day of a taxable year of such corporation shall in- clude in his gross income, for his taxable year in which or with which the taxable year of the corporation ends, the amount he would have re- ceived as a dividend, if on such last day there had been distributed pro rata to its sharehold- ers by such corporation an amount equal to the corporation's undistributed taxable income for the corporation's taxable year. For purposes of this chapter, the amount so Included shall be treated as an amour, distributed as a dividend on the last day of the taxable year of the corpo- ration. (c) Undistributed taxable income defined For purposes of this section, the term "undis- tributed taxable income" means taxable income (computed as provided in subsection (d)) minus the sum of (1) the taxes imposed by sections 56 and 1378(a) and (2) the amount of money dis- tributed as dividesids during the taxable year, to the extent that any such amount is a distri- bution out of earnings and profits of the tax- able year as specified in section 316(a)(2). (d) Taxable income For purposes of this subchapter, the taxable income of an electing small business corpora- tion shall be determined without regard to- (1) the deduction allowed by section 172 (re- lating to net operating loss deduction), and (2) the deductions allowed by part VIII of subchapter B (other than the deduction al- lowed by section 248, relating to organization expenditures). (Added Pub. L. 85-866, title I, § 64(a), Sept. 2, 1958, 72 Stat. 1652, and amended Pub. L. 89- 389, § 2(b)(3), Apr. 14, 1966, 80 Stat. 114; Pub. L. 91-172, title III, §301(b)(10), Dec. 30, 1969, 83 Stat. 586.) AMENDMENTS 1969-Subsec. (c). Pub. L. 91-172 inserted reference to tax imposed by section 56. 1966-Subsec. (c). Pub. L. 89-389 inserted "the sum of (1) the tax imposed by section 1378(a) and (2)" after "minus". EFrECTVE DATE OF 1969 AMENDMENT Amendment by Pub. L. 91-172 applicable to taxable years ending after Dec. 31, 1969, see section 301(c) of Pub. L. 91-172, set out as Elfective Date note under section 56 of this title. ErncTmw DATE OF 1966 AMNMENT Amendment of subsec. (c) by Pub. L. 89-389 applica- ble with respect to taxable years of electing small busi- § 1373 Page 734