26 U.S.C. § 1373

Foreign income

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(a) S corporation treated as partnership, etc.For purposes of subparts A and F of part III, and part V, of subchapter N (relating to income from sources without the United States)—(1) an S corporation shall be treated as a partnership, and(2) the shareholders of such corporation shall be treated as partners of such partnership.(b) Recapture of overall foreign loss

For purposes of section 904(f) (relating to recapture of overall foreign loss), the making or termination of an election to be treated as an S corporation shall be treated as a disposition of the business.

(Added Pub. L. 97–354, § 2, Oct. 19, 1982, 96 Stat. 1682.)Editorial NotesPrior Provisions

A prior section 1373, added Pub. L. 85–866, title I, § 64(a), Sept. 2, 1958, 72 Stat. 1652; 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, related to taxation of corporation undistributed taxable income to shareholders, prior to the general revision of this subchapter by section 2 of Pub. L. 97–354.

Statutory Notes and Related SubsidiariesEffective Date

Section applicable to taxable years beginning after Dec. 31, 1982, see section 6(a) of Pub. L. 97–354, set out as a note under section 1361 of this title.

Notes of Decisions
Cited in 23 cases, 1963–2001 · leading case: Donahue v. Rodd Electrotype Co. of New England, Inc., 328 N.E.2d 505 (Mass. 1975).
Donahue v. Rodd Electrotype Co. of New England, Inc., 328 N.E.2d 505 (Mass. 1975). · cites it 2× “§ 1372 [b] [1] [1970]) and causes inclusion of the corporation's undistributed, as well as distributed, taxable income in the gross income of the stockholders for the year ( 26 U.S.C. § 1373 [a] [1970]). This is essentially the manner in which partnership earnings are taxed.”
E. Keith Owens v. Comm'r of Internal Revenue, 568 F.2d 1233 (6th Cir. 1977). · cites it 2× “3 See 26 U.S.C. § 1373 . The Tax Court based this determination on “gaps” in the evidence left by taxpayer as well as on the proofs put into evidence.”
Swope v. Swope, 739 P.2d 273 (Idaho 1987). · cites it 2× “[8] At the time that Charles sold his 4000 shares of corporate stock on June 6, 1980, Charles' share of the undistributed taxable income as defined by 26 U.S.C. § 1373 , which had been retained by the corporation, was the sum of $39,171.”
Valentino v. Franchise Tax Bd., 2001 Cal. Daily Op. Serv. 2403 (Cal. Ct. App. 2001). “( 26 U.S.C. §§ 1373 , 875, 871.) Rather, its exclusion from Internal Revenue Code section 1366(b) is simply because as to nonresident aliens the sourcing rule is irrelevant given an S corporation cannot have them as shareholders.”
Marie L. Detreville v. United States of Am., Marie L. Detreville v. United States, 445 F.2d 1306 (4th Cir. 1971). · cites it 3× “See 26 U.S.C. § 1373 . Taxable income retained by the corporation may then be distributed tax-free in subsequent years.”
Somers v. Gardner, 254 F. Supp. 35 (E.D. Va. 1966). · cites it 5× “§ 411 (a) defines the term “net earnings from self-employment” as the amount of gross income computed under the income tax provisions of the Internal Revenue Code, which include 26 U.S.C.A. § 1373 (b), supra. It is from this language that the Secretary finds a constructive…”
A. G. Attebury Et Ux. v. United States, 430 F.2d 1162 (5th Cir. 1970). · cites it 2× “” 26 U.S.C.A. § 1373 (c). 10 . See note 18 infra.”
Kulick v. Dep't of Revenue, 624 P.2d 93 (Or. 1981). “” 26 USC § 1373 (a) (1976): "The undistributed taxable income of an electing 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 section.”
Jasper L. House, Jr., & Edra F. House v. Comm'r of Internal Revenue, 453 F.2d 982 (5th Cir. 1972). “26 U.S.C. §§ 1373 and 1377. The House corporations each made such an election.”
Swope v. Swope, 834 P.2d 298 (Idaho 1992). “This sale included all of Charles’s corporate stock and debentures in the corporation as well as his partnership interest in the real property____ At the time that Charles sold his 4000 shares of corporate stock on June 6, 1980, Charles’ share of the undistributed taxable income…”
Benderoff v. United States, 270 F. Supp. 87 (S.D. Iowa 1967). · cites it 2× “The statute governing the question is 26 U.S.C. § 1373 (b) . 4 A treasury regulation interpreting this statute provides as follows : (b) Source of distribution.”
United States v. Jack Nathan, 536 F.2d 988 (2d Cir. 1976). “26 U.S.C. § 1373 . Therefore, his willful participation in a scheme to understate the agency’s profits constitutes evasion of his personal income taxes under 26 U.”
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