IRS EXPLAINS EFFECTIVE DATE PROVISIONS OF S CORP. REGS.

Notice 92-56

The Internal Revenue Service published final regulations under sections 1362 and 1363 of the Internal Revenue Code on November 25, 1992. These regulations are effective for taxable years of S corporations beginning after December 31, 1992. Sections 1.1362-7 and 1.1363-1(d) of the regulations provide that for taxable years to which the final regulations do not apply, S corporations and their shareholders that are subject to the provisions of section 1362 and section 1363 must take reasonable return positions. Except for substantive modifications in response to comments, only minor simplification changes were made so that the final regulations generally provide the same rules as the proposed regulations published December 27, 1988 (53 Fed. Reg. 52190), as modified by the proposed regulations published April 17, 1992 (57 Fed. Reg. 13676). These changes are described in the preamble to the final regulations. Nevertheless, an S corporation and its shareholders may rely on the proposed regulations published December 27, 1988, and April 17, 1992, as a reasonable return position for years to which the final regulations do not apply.

The principal author of this notice is Andrea Tucker of the Off ice of Assistant Chief Counsel (Passthroughs and Special Industries). For further information regarding this notice contact Andrea Tucker on (202) 622-3080 (not a toll-free call).