1. (1) The "post-termination transition period" is:

   1. (a) The period that begins on the day following the last day of the last S year, and ending on the later of:

      1. 1. One year from the last day of the S year, or
      2. 2. The due date, including extensions, for filing the return for the last S year.
   2. (b) The 120-day period beginning on the date of a determination pursuant to an audit of the taxpayer which follows the termination of the corporation's election to be treated as a federal S corporation and which adjusts a subchapter S item of income, loss, or deduction of the corporation.

   3. (c) The 120-day period beginning on the date of a determination that the S corporation's election under 26 U.S.C. §1362 for a previous tax year had been terminated.

      1. 2. If (c) above applies, and a determination is made on July 1, 1986, that the S election was invalid for the year ended December 31, 1985, the post-termination transition period begins on July 1, 1986, and ends on October 28, 1986.

      (d)1. For example, if (a) above applies, the return, with extensions, will be due not later than 8 ½ months after the year end, and the post-termination transition period would always end one year from the last day of the S year. For instance, if the S year ends on December 31, 1985, the post-termination transition period begins on January 1, 1986, and ends on December 31, 1986.

2. (2) The term "determination", as used herein, means:

   1. (a) A determination as defined in U.S.C. §1313(a); or
   2. (b) An agreement between the corporation and the U.S. Secretary of the Treasury that the corporation failed to qualify as an S corporation.
3. (3) The term "S year" means a taxable year for which a corporation is an Alabama S corporation.

Author: Verlon Frost, Catherine McCary, Ed Cutter, CPA

Statutory Authority: Code of Ala. 1975, §§40-2A-7(a)(5), 40-18-57, 40-18-172.

History: Adopted November 13, 1985. Amended: Filed March 26, 1998; effective April 30,1998. Amended: Filed March 31, 2000, effective May 5, 2000.