Page 740

TITLE 26-INTERNAL REVENUE CODE 15th day of the third month following the close of such taxable year, if all the provisions of the plan which are necessary to satisfy this require- ment are in effect by the end of such period and have been made effective for all purposes with respect to the whole of such period. (b) Taxability of shareholder-employee beneficiaries (1) Inclusion of excess contributions in gross income Notwithstanding the provisions of section 402 (relating to taxability of beneficiary of employees' trust), section 403 (relating to tax- ation of employee annuities), or section 405(d) (relating to taxability of beneficiaries under qualified bond purchase plans), an indi- vidual who is a shareholder-employee of an electing small business corporation shall in- clude in gross income, for his taxable year in which or with which the taxable year of the corporation ends, the excess of the amount of contributions paid on his behalf which is de- ductible under section 404(a)(1), (2), or (3) by the corporation for its taxable year over the lesser of- (A) 15 percent of the compensation re- ceived or accrued by him from such coipo- ration during its taxable year, or (B) $7,500. (2) Treatment of amounts included in gross income Any amount included in the gross income of a shareholder-employee under paragraph (1) shall be treated as consideration for the con- tract contributed by the shareholder-employ- ee for purposes of section 72 (relating to an- nuities). (3) Deduction for amounts not received as benefits If- (A) amounts are included in the gross income of an individual under paragraph (1), and (B) the rights of such individual (or his beneficiaries) under the plan terminate before payments under the plan which are excluded from gross income equal the amounts included in gross income under paragraph (1), then there shall be allowed as a deduction, for the taxable year in which such rights ter- minate, an amount equal to the excess of the amounts included in gross income under para- graph (1) over such payments. (c) Carryover of amounts deductible No amount deductible shall be carried for- ward under the second sentence of section 404(a)(3)(A) (relating to limits on deductible contributions under stock bonus and profit- sharing trusts) to a taxable year of a corpora- tion with respect to which it is not an electing small business corporation from a taxable year (beginning after December 31, 1970) with re- spect to which it is an electing small business corporation. (d) Shareholder.employee For purposes of this section, the term "share- holder-employee" means an employee or officer of an electing small business corporation who owns (or is considered as owning within the meaning of section 318(a)(1), on any day during the taxable year of such corporation, more than 5 percent of the outstanding stock of the corporation. (Added Pub. L. 91-172, title V, § 531(a), Dec. 30, 1969, 83 Stat. 654, and amended Pub. L. 93-406, title II, § 2001(b), Sept. 2, 1974, 88 Stat. 952.) AMENDMENTS 1974-Subsec. (b)(1)(A). Pub. L. 93-406, § 2001(b)(1), substituted "15 percent" for "10 percent". Subsec. (b)(1)(B). Pub. L. 93-406, § 2001(b)(2), substi- tuted "$7,500" for "$2,500". ErnFcTxvE DATE OF 1974 AMENDMENT Amendment by Pub. L. 93-406 applicable to taxable years beginning after Dec. 31, 1973, see section 2001(i)(1) of Pub. L. 93-406, set out as an Effective Date of 1974 Amendment note under section 404 of this title. ErFEcTIvE DATE Section 531(d) of Pub. L. 91-172 provided that: "The amendments made by this section [enacting this sec- tion and amending section 62 of this title] shall apply with respect to taxable years of electing small business corporations beginning after December 31, 1970." SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 62, 401, 4975 of this title: title 29 section 1108. Subchapter T-Cooperatives and Their Patrons Part I. Tax treatment of cooperatives. II. Tax treatment by patrons of patronage dividends and per-unit retain allocations. III. Definitions: special rules. AMENDMENTS 1966-Pub. L. 89-809, title II, § 211(b)(5), Nov. 13, 1966, 80 Stat. 1582, inserted "and per-unit retain allo- cations" in heading of Part II. 1962-Pub. L. 87-834, § 17(a), Oct. 16, 1962, 76 Stat. 1045, added the headings of subchapter T and of parts I to III. SuBcHAPTER REFERRED TO IN OTHER SECTIONS This subchapter is referred to in section 46 of this title. PART I-TAX TREATMENT OF COOPERATIVES Sec. 1381. Organizations to which part applies. 1382. Taxable income of cooperatives. 1383. Computation of tax where cooperative redeems nonqualified written notices of allocation or nonqualified per-unit retain certificates. AMENDMENTS 1966-Pub. L. 89-809. title II, § 211(a)(8), Nov. 13, 1966, 80 Stat. 1582, inserted "or nonqualified per-unit retain certificates" in item 1383. 1962-Pub. L. 87-834, § 17(a), Oct. 16, 1962, 76 Stat. 1045, added the heading of Part I and items 1381 to 1383. PART REFERRED TO IN OTHER SECTIONS This part is referred to in section 521 of this title. § 1381. Organizations to which part applies (a) In general This part shall apply to- (1) any organization exempt from tax under section 521 (relating to exemption of farmers' cooperatives from tax), and Page 740 § 1381