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H.R.4840 - S Corporation Modernization Act of 2007
To amend the Internal Revenue Code of 1986 to provide for S corporation reform, and for other purposes.
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December 19, 2007
Mr. KIND (for himself, Mr. RAMSTAD, Mrs. JONES of Ohio, Mr. ENGLISH of Pennsylvania, Ms. SCHWARTZ, Mr. SAM JOHNSON of Texas, and Mr. KAGEN) introduced the following bill; which was referred to the Committee on Ways and MeansCommentsClose CommentsPermalink
SECTION 1. SHORT TITLE, REFERENCE.
(b) Amendment of 1986 Code- Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.CommentsClose CommentsPermalink
SEC. 2. REDUCED RECOGNITION PERIOD FOR BUILT-IN GAINS.
`(7) RECOGNITION PERIOD- The term `recognition period' means the 7-year period beginning with the 1st day of the 1st taxable year for which the corporation was an S corporation. For purposes of applying this section to any amount includible in income by reason of distributions to shareholders pursuant to section 593(e), the preceding sentence shall be applied without regard to the duration of the recognition period in effect on the date of such distribution.'.CommentsClose CommentsPermalink
(1) shall apply for purposes of determining the recognition period with respect to 1st days referred to in section 1374(d)(7) of the Internal Revenue Code of 1986 occurring before, on, or after the date of the enactment of this Act, butCommentsClose CommentsPermalink
SEC. 3. EXPANSION OF QUALIFYING BENEFICIARIES OF AN ELECTING SMALL BUSINESS TRUST.
(a) No Look Through for Eligibility Purposes- Clause (v) of section 1361(c)(2)(B) (relating to treatment as shareholders) is amended by adding at the end the following new sentence: `This clause shall not apply for purposes of subsection (b)(1)(C).'.CommentsClose CommentsPermalink
SEC. 4. REPEAL OF EXCESSIVE PASSIVE INVESTMENT INCOME AS A TERMINATION EVENT.
SEC. 5. MODIFICATIONS TO PASSIVE INCOME RULES.
(1) IN GENERAL- Paragraph (2) of section 1375(a) (relating to tax imposed when passive investment income of corporation having accumulated earnings and profits exceeds 25 percent of gross receipts) is amended by striking `25 percent' and inserting `60 percent'.CommentsClose CommentsPermalink
SEC. 6. EXPANSION OF S CORPORATION ELIGIBLE SHAREHOLDERS TO INCLUDE IRAS.
(b) Sale of Stock in IRA Relating to S Corporation Election Exempt From Prohibited Transaction Rules- Paragraph (16) of section 4975(d) (relating to exemptions) is amended to read as follows:CommentsClose CommentsPermalink
`(16) a sale of stock held by a trust which constitutes an individual retirement account under section 408(a) to the individual for whose benefit such account is established if--CommentsClose CommentsPermalink
`(B) such sale is for fair market value at the time of sale (as established by an independent appraiser) and the terms of the sale are otherwise at least as favorable to such trust as the terms that would apply on a sale to an unrelated party,CommentsClose CommentsPermalink
SEC. 7. ALLOWANCE OF DEDUCTION FOR CHARITABLE CONTRIBUTIONS FOR ELECTING SMALL BUSINESS TRUSTS.
(a) In General- Section 641(c)(2)(C) (relating to modifications) is amended by adding at the end the following new sentence: `The deduction for charitable contributions allowed under clause (i) shall be determined without regard to section 642(c), and the limitations imposed by section 170(b)(1) on the amount of the deduction shall be applied to the electing small business trust as if it were an individual.'.CommentsClose CommentsPermalink
SEC. 8. ENTITY NEUTRALITY STUDY.
Not later than December 31, 2009, the Comptroller General of the United States shall conduct a study on entity neutrality under the Internal Revenue Code of 1986 and shall submit a report to the Committee on Ways and Means of the House of Representatives which--CommentsClose CommentsPermalink
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