
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC441]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
       Subchapter E--Accounting Periods and Methods of Accounting
 
                       PART I--ACCOUNTING PERIODS
 
Sec. 441. Period for computation of taxable income


(a) Computation of taxable income

    Taxable income shall be computed on the basis of the taxpayer's 
taxable year.

(b) Taxable year

    For purposes of this subtitle, the term ``taxable year'' means--
        (1) the taxpayer's annual accounting period, if it is a calendar 
    year or a fiscal year;
        (2) the calendar year, if subsection (g) applies;
        (3) the period for which the return is made, if a return is made 
    for a period of less than 12 months; or
        (4) in the case of a FSC or DISC filing a return for a period of 
    at least 12 months, the period determined under subsection (h).

(c) Annual accounting period

    For purposes of this subtitle, the term ``annual accounting period'' 
means the annual period on the basis of which the taxpayer regularly 
computes his income in keeping his books.

(d) Calendar year

    For purposes of this subtitle, the term ``calendar year'' means a 
period of 12 months ending on December 31.

(e) Fiscal year

    For purposes of this subtitle, the term ``fiscal year'' means a 
period of 12 months ending on the last day of any month other than 
December. In the case of any taxpayer who has made the election provided 
by subsection (f) the term means the annual period (varying from 52 to 
53 weeks) so elected.

(f) Election of year consisting of 52-53 weeks

                          (1) General rule

        A taxpayer who, in keeping his books, regularly computes his 
    income on the basis of an annual period which varies from 52 to 53 
    weeks and ends always on the same day of the week and ends always--
            (A) on whatever date such same day of the week last occurs 
        in a calendar month, or
            (B) on whatever date such same day of the week falls which 
        is nearest to the last day of a calendar month,

    may (in accordance with the regulations prescribed under paragraph 
    (3)) elect to compute his taxable income for purposes of this 
    subtitle on the basis of such annual period. This paragraph shall 
    apply to taxable years ending after the date of the enactment of 
    this title.

                (2) Special rules for 52-53-week year

        (A) Effective dates

            In any case in which the effective date or the applicability 
        of any provision of this title is expressed in terms of taxable 
        years beginning, including, or ending with reference to a 
        specified date which is the first or last day of a month, a 
        taxable year described in paragraph (1) shall (except for 
        purposes of the computation under section 15) be treated--
                (i) as beginning with the first day of the calendar 
            month beginning nearest to the first day of such taxable 
            year, or
                (ii) as ending with the last day of the calendar month 
            ending nearest to the last day of such taxable year,

        as the case may be.

        (B) Change in accounting period

            In the case of a change from or to a taxable year described 
        in paragraph (1)--
                (i) if such change results in a short period (within the 
            meaning of section 443) of 359 days or more, or of less than 
            7 days, section 443(b) (relating to alternative tax 
            computation) shall not apply;
                (ii) if such change results in a short period of less 
            than 7 days, such short period shall, for purposes of this 
            subtitle, be added to and deemed a part of the following 
            taxable year; and
                (iii) if such change results in a short period to which 
            subsection (b) of section 443 applies, the taxable income 
            for such short period shall be placed on an annual basis for 
            purposes of such subsection by multiplying the gross income 
            for such short period (minus the deductions allowed by this 
            chapter for the short period, but only the adjusted amount 
            of the deductions for personal exemptions as described in 
            section 443(c)) by 365, by dividing the result by the number 
            of days in the short period, and the tax shall be the same 
            part of the tax computed on the annual basis as the number 
            of days in the short period is of 365 days.

       (3) Special rule for partnerships, S corporations, and 
                        personal service corporations

        The Secretary may by regulation provide terms and conditions for 
    the application of this subsection to a partnership, S corporation, 
    or personal service corporation (within the meaning of section 
    441(i)(2)).

                           (4) Regulations

        The Secretary shall prescribe such regulations as he deems 
    necessary for the application of this subsection.

(g) No books kept; no accounting period

    Except as provided in section 443 (relating to returns for periods 
of less than 12 months), the taxpayer's taxable year shall be the 
calendar year if--
        (1) the taxpayer keeps no books;
        (2) the taxpayer does not have an annual accounting period; or
        (3) the taxpayer has an annual accounting period, but such 
    period does not qualify as a fiscal year.

(h) Taxable year of FSC's and DISC's

                           (1) In general

        For purposes of this subtitle, the taxable year of any FSC or 
    DISC shall be the taxable year of that shareholder (or group of 
    shareholders with the same 12-month taxable year) who has the 
    highest percentage of voting power.

    (2) Special rule where more than one shareholder (or group) 
                           has highest percentage

        If 2 or more shareholders (or groups) have the highest 
    percentage of voting power under paragraph (1), the taxable year of 
    the FSC or DISC shall be the same 12-month period as that of any 
    such shareholder (or group).

                 (3) Subsequent changes of ownership

        The Secretary shall prescribe regulations under which paragraphs 
    (1) and (2) shall apply to a change of ownership of a corporation 
    after the taxable year of the corporation has been determined under 
    paragraph (1) or (2) only if such change is a substantial change of 
    ownership.

                     (4) Voting power determined

        For purposes of this subsection, voting power shall be 
    determined on the basis of total combined voting power of all 
    classes of stock of the corporation entitled to vote.

(i) Taxable year of personal service corporations

                           (1) In general

        For purposes of this subtitle, the taxable year of any personal 
    service corporation shall be the calendar year unless the 
    corporation establishes, to the satisfaction of the Secretary, a 
    business purpose for having a different period for its taxable year. 
    For purposes of this paragraph, any deferral of income to 
    shareholders shall not be treated as a business purpose.

                  (2) Personal service corporation

        For purposes of this subsection, the term ``personal service 
    corporation'' has the meaning given such term by section 269A(b)(1), 
    except that section 269A(b)(2) shall be applied--
            (A) by substituting ``any'' for ``more than 10 percent'', 
        and
            (B) by substituting ``any'' for ``50 percent or more in 
        value'' in section 318(a)(2)(C).

    A corporation shall not be treated as a personal service corporation 
    unless more than 10 percent of the stock (by value) in such 
    corporation is held by employee-owners (within the meaning of 
    section 269A(b)(2), as modified by the preceding sentence). If a 
    corporation is a member of an affiliated group filing a consolidated 
    return, all members of such group shall be taken into account in 
    determining whether such corporation is a personal service 
    corporation.

(Aug. 16, 1954, ch. 736, 68A Stat. 148; Pub. L. 88-272, title II, 
Sec. 235(c)(3), Feb. 26, 1964, 78 Stat. 127; Pub. L. 94-455, title XIX, 
Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 95-30, title 
I, Sec. 102(b)(5), May 23, 1977, 91 Stat. 137; Pub. L. 98-369, div. A, 
title IV, Sec. 474(b)(2), title VIII, Sec. 803, July 18, 1984, 98 Stat. 
830, 1000; Pub. L. 99-514, title I, Sec. 104(b)(6), title VIII, 
Sec. 806(c)(1), (d), Oct. 22, 1986, 100 Stat. 2105, 2364; Pub. L. 100-
647, title I, Sec. 1008(e)(4), Nov. 10, 1988, 102 Stat. 3440.)


                               Amendments

    1988--Subsec. (i)(2). Pub. L. 100-647 inserted at end ``A 
corporation shall not be treated as a personal service corporation 
unless more than 10 percent of the stock (by value) in such corporation 
is held by employee-owners (within the meaning of section 269A(b)(2), as 
modified by the preceding sentence). If a corporation is a member of an 
affiliated group filing a consolidated return, all members of such group 
shall be taken into account in determining whether such corporation is a 
personal service corporation.''
    1986--Subsec. (f)(2)(B)(iii). Pub. L. 99-514, Sec. 104(b)(6), struck 
out ``and by adding the zero bracket amount,'' after ``in the short 
period,''.
    Subsec. (f)(3), (4). Pub. L. 99-514, Sec. 806(d), added par. (3) and 
redesignated former par. (3) as (4).
    Subsec. (i). Pub. L. 99-514, Sec. 806(c)(1), added subsec. (i).
    1984--Subsec. (b)(4). Pub. L. 98-369, Sec. 803(a), added par. (4).
    Subsec. (f)(2)(A). Pub. L. 98-369, Sec. 474(b)(2), substituted 
``section 15'' for ``section 21'' in provisions preceding cl. (i).
    Subsec. (h). Pub. L. 98-369, Sec. 803(b), added subsec. (h).
    1977--Subsec. (f)(2)(B)(iii). Pub. L. 95-30 substituted 
``multiplying the gross income for such short period (minus the 
deductions allowed by this chapter for the short period, but only the 
adjusted amount of the deductions for personal exemptions as described 
in section 443(c)) by 365, by dividing the result by the number of days 
in the short period, and by adding the zero bracket amount'' for 
``multiplying such income by 365 and dividing the result by the number 
of days in the short period''.
    1976--Subsec. (f)(3). Pub. L. 94-455 struck out ``or his delegate'' 
after ``Secretary''.
    1964--Subsec. (f)(2)(A). Pub. L. 88-272 inserted ``, including,'' 
before ``or ending with reference to''.


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-647 effective, except as otherwise 
provided, as if included in the provision of the Tax Reform Act of 1986, 
Pub. L. 99-514, to which such amendment relates, see section 1019(a) of 
Pub. L. 100-647, set out as a note under section 1 of this title.


                    Effective Date of 1986 Amendment

    Amendment by section 104(b)(6) of Pub. L. 99-514 applicable to 
taxable years beginning after Dec. 31, 1986, see section 151(a) of Pub. 
L. 99-514, set out as a note under section 1 of this title.
    Amendment by section 806(c)(1), (d) of Pub. L. 99-514 applicable to 
taxable years beginning after Dec. 31, 1986, with special provisions 
applicable to taxpayers who are required to change their accounting 
periods, see section 806(e) of Pub. L. 99-514, set out as a note under 
section 1378 of this title.


                    Effective Date of 1984 Amendment

    Amendment by section 474(b)(2) of Pub. L. 98-369 applicable to 
taxable years beginning after Dec. 31, 1983, and to carrybacks from such 
years, see section 475(a) of Pub. L. 98-369, set out as a note under 
section 21 of this title.
    Amendment by section 803 of Pub. L. 98-369 applicable to taxable 
years beginning after Dec. 31, 1984, see section 805(a)(4) of Pub. L. 
98-369, as amended, set out as a note under section 245 of this title.


                    Effective Date of 1977 Amendment

    Amendment by Pub. L. 95-30 applicable to taxable years beginning 
after Dec. 31, 1976, see section 106(a) of Pub. L. 95-30, set out as a 
note under section 1 of this title.


                    Effective Date of 1964 Amendment

    Amendment by Pub. L. 88-272 applicable to taxable years ending after 
Dec. 31, 1963, see section 235(d) of Pub. L. 88-272, set out as a note 
under section 1551 of this title.


              Construction of Section 806 of Pub. L. 99-514

    Nothing in section 806 of Pub. L. 99-514 or in any legislative 
history relating thereto to be construed as requiring the Secretary of 
the Treasury or his delegate to permit an automatic change of a taxable 
year, see section 1008(e)(9) of Pub. L. 100-647, set out as a note under 
section 1378 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 267, 280H, 442, 444, 706 of 
this title.
