Post-Termination Transition Period Law and Legal Definition
According to 26 USCS § 1377 [Title 26. Internal Revenue Code; Subtitle A. Income Taxes; Chapter 1. Normal Taxes and Surtaxes; Subchapter S. TAX Treatment of S Corporations and their Shareholders; Part IV. Definitions; Miscellaneous], the term "post-termination transition period" means
(A) the period beginning on the day after the last day of the corporation's last taxable year as an S corporation and ending on the later of
(i) the day which is 1 year after such last day, or
(ii) the due date for filing the return for such last year as an S corporation (including extensions),
(B) the 120-day period beginning on the date of any determination pursuant to an audit of the taxpayer which follows the termination of the corporation's election and which adjusts a subchapter S item of income, loss, or deduction of the corporation arising during the S period (as defined in section 1368(e)(2) [26 USCS § 1368(e)(2)]), and
(C) the 120-day period beginning on the date of a determination that the corporation's election under section 1362(a) [26 USCS § 1362(a)] had terminated for a previous taxable year.
(2) Determination defined. For purposes of paragraph (1), the term "determination" means--
(A) a determination as defined in section 1313(a) [26 USCS § 1313(a)], or
(B an agreement between the corporation and the Secretary that the corporation failed to qualify as an S corporation.
(3) Special rules for audit related post-termination transition periods.
(A) No application to carryovers. Paragraph (1)(B) shall not apply for purposes of section 1366(d)(3) [26 USCS § 1366(d)(3)].
(B) Limitation on application to distributions. Paragraph (1)(B) shall apply to a distribution described in section 1371(e) [26 USCS § 1371(e)] only to the extent that the amount of such distribution does not exceed the aggregate increase (if any) in the accumulated adjustments account (within the meaning of section 1368(e) [26 USCS § 1368(e)]) by reason of the adjustments referred to in such paragraph.
