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97-354, 96 Stat. 1691-1692.5 Subchapter D provides that the
items of income, loss, deduction, and credit of S corporations
generally will be determined in a unified manner at the corporate
level as opposed to the individual shareholder level.
Section 6241 provides express authority for the Secretary to
prescribe regulations that create exceptions to the unified S
corporation audit and litigation procedures. On January 27,
1987, the Secretary promulgated section 301.6241-1T(c)(2),
Temporary Proced. & Admin. Regs., 52 Fed. Reg. 3003 (Jan. 30,
1987), providing an exception to the unified S corporation audit
and litigation procedures for small S corporations. Section
301.6241-1T(c)(2), Temporary Proced. & Admin. Regs., is effective
for any taxable year of an S corporation the due date of the
return for which is on or after January 30, 1987. Sec. 301.6241-
1T(c)(2)(i), Temporary Proced. & Admin. Regs., 52 Fed. Reg. 3003
(Jan. 30, 1987). The section provides in pertinent part as
follows:
(2) Exception for small S corporations--
* * * * * * *
(ii) Five or fewer shareholders. For
purposes of this paragraph (c), an S corporation shall
not include a small S corporation. A small S
corporation is defined as an S corporation with 5 or
5 Subchapter D, consisting of secs. 6241 through 6245, was
repealed applicable to tax years beginning after Dec. 31, 1996.
Small Business Job Protection Act of 1996, Pub. L. 104-188, sec.
1307(c)(1), 110 Stat. 1755, 1781.
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