
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: 26USC443]

 
                     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. 443. Returns for a period of less than 12 months


(a) Returns for short period

    A return for a period of less than 12 months (referred to in this 
section as ``short period'') shall be made under any of the following 
circumstances:

               (1) Change of annual accounting period

        When the taxpayer, with the approval of the Secretary, changes 
    his annual accounting period. In such a case, the return shall be 
    made for the short period beginning on the day after the close of 
    the former taxable year and ending at the close of the day before 
    the day designated as the first day of the new taxable year.

        (2) Taxpayer not in existence for entire taxable year

        When the taxpayer is in existence during only part of what would 
    otherwise be his taxable year.

(b) Computation of tax on change of annual accounting period

                          (1) General rule

        If a return is made under paragraph (1) of subsection (a), the 
    taxable income for the short period shall be placed on an annual 
    basis by multiplying the modified taxable income for such short 
    period by 12, dividing the result by the number of months in the 
    short period. The tax shall be the same part of the tax computed on 
    the annual basis as the number of months in the short period is of 
    12 months.

                            (2) Exception

        (A) Computation based on 12-month period

            If the taxpayer applies for the benefits of this paragraph 
        and establishes the amount of this taxable income for the 12-
        month period described in subparagraph (B), computed as if that 
        period were a taxable year and under the law applicable to that 
        year, then the tax for the short period, computed under 
        paragraph (1), shall be reduced to the greater of the following:
                (i) an amount which bears the same ratio to the tax 
            computed on the taxable income for the 12-month period as 
            the modified taxable income computed on the basis of the 
            short period bears to the modified taxable income for the 
            12-month period; or
                (ii) the tax computed on the modified taxable income for 
            the short period.

        The taxpayer (other than a taxpayer to whom subparagraph (B)(ii) 
        applies) shall compute the tax and file his return without the 
        application of this paragraph.

        (B) 12-month period

            The 12-month period referred to in subparagraph (A) shall 
        be--
                (i) the period of 12 months beginning on the first day 
            of the short period, or
                (ii) the period of 12 months ending at the close of the 
            last day of the short period, if at the end of the 12 months 
            referred to in clause (i) the taxpayer is not in existence 
            or (if a corporation) has theretofore disposed of 
            substantially all of its assets.

        (C) Application for benefits

            Application for the benefits of this paragraph shall be made 
        in such manner and at such time as the regulations prescribed 
        under subparagraph (D) may require; except that the time so 
        prescribed shall not be later than the time (including 
        extensions) for filing the return for the first taxable year 
        which ends on or after the day which is 12 months after the 
        first day of the short period. Such application, in case the 
        return was filed without regard to this paragraph, shall be 
        considered a claim for credit or refund with respect to the 
        amount by which the tax is reduced under this paragraph.

        (D) Regulations

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

                 (3) Modified taxable income defined

        For purposes of this subsection the term ``modified taxable 
    income'' means, with respect to any period, the gross income for 
    such period minus the deductions allowed by this chapter for such 
    period (but, in the case of a short period, only the adjusted amount 
    of the deductions for personal exemptions).

(c) Adjustment in deduction for personal exemption

    In the case of a taxpayer other than a corporation, if a return is 
made for a short period by reason of subsection (a)(1) and if the tax is 
not computed under subsection (b)(2), then the exemptions allowed as a 
deduction under section 151 (and any deduction in lieu thereof) shall be 
reduced to amounts which bear the same ratio to the full exemptions as 
the number of months in the short period bears to 12.

(d) Adjustment in computing minimum tax and tax preferences

    If a return is made for a short period by reason of subsection (a)--
        (1) the alternative minimum taxable income for the short period 
    shall be placed on an annual basis by multiplying such amount by 12 
    and dividing the result by the number of months in the short period, 
    and
        (2) the amount computed under paragraph (1) of section 55(a) 
    shall bear the same relation to the tax computed on the annual basis 
    as the number of months in the short period bears to 12.

(e) Cross references

        For inapplicability of subsection (b) in computing--
            (1) Accumulated earnings tax, see section 536.
            (2) Personal holding company tax, see section 546.
            (3) Undistributed foreign personal holding company income, 
        see section 557.
            (4) The taxable income of a regulated investment company, 
        see section 852(b)(2)(E).
            (5) The taxable income of a real estate investment trust, 
        see section 857(b)(2)(C).
        For returns for a period of less than 12 months in the case of a 
    debtor's election to terminate a taxable year, see section 
    1398(d)(2)(E).

(Aug. 16, 1954, ch. 736, 68A Stat. 149; Pub. L. 86-779, Sec. 10(i), 
Sept. 14, 1960, 74 Stat. 1009; Pub. L. 91-172, title III, 
Sec. 301(b)(6), Dec. 30, 1969, 83 Stat. 585; Pub. L. 94-455, title III, 
Sec. 301(e), title XII, Sec. 1204(c)(2), title XVI, Sec. 1607(b)(1)(C), 
title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1553, 1697, 1757, 
1834; Pub. L. 95-30, title I, Sec. 102(b)(6), May 23, 1977, 91 Stat. 
137; Pub. L. 95-600, title IV, Sec. 421(e)(2), title VII, 
Sec. 703(o)(1)-(3), Nov. 6, 1978, 92 Stat. 2876, 2943; Pub. L. 96-222, 
title I, Sec. 104(a)(4)(H)(iii), Apr. 1, 1980, 94 Stat. 217; Pub. L. 96-
589, Sec. 3(d), Dec. 24, 1980, 94 Stat. 3401; Pub. L. 97-448, title III, 
Sec. 304(a), Jan. 12, 1983, 96 Stat. 2398; Pub. L. 99-514, title I, 
Sec. 104(b)(7), title VII, Sec. 701(e)(3), Oct. 22, 1986, 100 Stat. 
2105, 2342.)


                               Amendments

    1986--Subsec. (b)(1). Pub. L. 99-514, Sec. 104(b)(7)(A), struck out 
``, and adding the zero bracket amount'' after ``by the number of months 
in the short period''.
    Subsec. (b)(2)(A)(ii). Pub. L. 99-514, Sec. 104(b)(7)(B), amended 
cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: ``the 
tax computed on the sum of the modified taxable income for the short 
period plus the zero bracket amount.''
    Subsec. (d). Pub. L. 99-514, Sec. 701(e)(3), substituted ``and tax 
preferences'' for ``for tax preferences'' in heading and amended text 
generally. Prior to amendment, subsec. (d) read as follows: ``If a 
return is made for a short period by reason of subsection (a), then--
        ``(1) in the case of a taxpayer other than a corporation, the 
    alternative minimum taxable income for the short period shall be 
    placed on an annual basis by multiplying that amount by 12 and 
    dividing the result by the number of months in the short period, and 
    the amount computed under paragraph (1) of section 55(a) shall be 
    the same part of the tax computed on the annual basis as the number 
    of months in the short period is of 12 months; and
        ``(2) the $10,000 amount specified in section 56 (relating to 
    minimum tax for tax preferences), modified as provided by section 
    58, shall be reduced to the amount which bears the same ratio to 
    such specified amount as the number of days in the short period 
    bears to 365.''
    1983--Subsec. (e). Pub. L. 97-448 substituted ``section 
1398(d)(2)(E)'' for ``section 1398(d)(3)(E)''.
    1980--Subsec. (d)(2). Pub. L. 96-222 struck out ``in the case of a 
corporation,'' before ``the $10,000 amount''.
    Subsec. (e). Pub. L. 96-589 inserted cross reference to section 
1398(d)(3)(E) for returns for a period of less than 12 months in the 
case of a debtor's election to terminate a taxable year.
    1978--Subsec. (b)(1). Pub. L. 95-600, Sec. 703(o)(2), substituted 
``modified taxable income for such short period'' for ``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)''.
    Subsec. (b)(2). Pub. L. 95-600, Sec. 703(o)(1), substituted in cl. 
(i) ``modified taxable income'' for ``taxable income'' in two places and 
in cl. (ii) ``the sum of the modified taxable income'' for ``the taxable 
income'' and ``plus the zero bracket amount'' for ``without placing the 
taxable income on an annual basis''.
    Subsec. (b)(3). Pub. L. 95-600, Sec. 703(o)(3), added par. (3).
    Subsec. (d). Pub. L. 95-600, Sec. 421(e)(2), substituted 
``Adjustment in computing minimum tax for tax preferences'' for 
``Adjustment in exclusion for computing minimum tax for tax 
preferences'' in heading, redesignated existing provisions as par. (2) 
and as so redesignated applied par. (2) to corporations, and added par. 
(1).
    1977--Subsec. (b)(1). 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) by 12, dividing the result by the 
number of months in the short period, and adding the zero bracket 
amount'' for ``multiplying such income by 12, and dividing the result by 
the number of months in the short period''.
    1976--Subsec. (a)(1). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck 
out ``or his delegate'' after ``Secretary''.
    Subsec. (a)(3). Pub. L. 94-455, Sec. 1204(c)(2), struck out par. (3) 
which made termination of taxpayer's taxable year under section 6851 as 
one of the circumstances under which a tax return for a period of less 
than 12 months shall be made.
    Subsec. (b)(2)(D). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out 
``or his delegate'' after ``Secretary''.
    Subsec. (d). Pub. L. 94-455, Sec. 301(e), substituted ``$10,000'' 
for ``$30,000''.
    Subsec. (e)(5). Pub. L. 94-455, Sec. 1607(b)(1)(C), substituted 
``section 857(b)(2)(C)'' for ``section 857(b)(2)(D)''.
    1969--Subsecs. (d), (e). Pub. L. 91-172 added subsec. (d) and 
redesignated former subsec. (d) as (e).
    1960--Subsec. (d)(5). Pub. L. 86-779 added par. (5).


                    Effective Date of 1986 Amendment

    Amendment by section 104(b)(7) 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 701(e)(3) of Pub. L. 99-514 applicable to 
taxable years beginning after Dec. 31, 1986, with certain exceptions and 
qualifications, see section 701(f) of Pub. L. 99-514, set out as an 
Effective Date note under section 55 of this title.


                    Effective Date of 1983 Amendment

    Section 311(b)(1) of Pub. L. 97-448 provided that: ``The amendment 
made by subsection (a) of section 304 [amending this section] shall take 
effect as if included in the amendments made by section 3 of the 
Bankruptcy Tax Act of 1980 [section 3 of Pub. L. 96-589, which amended 
this section and sections 6012 and 6103 of this title].''


                    Effective Date of 1980 Amendments

    Amendment by Pub. L. 96-589 applicable to bankruptcy cases 
commencing more than 90 days after Dec. 24, 1980, see section 7(b) of 
Pub. L. 96-589, set out as a note under section 108 of this title.
    Amendment by Pub. L. 96-222 effective, except as otherwise provided, 
as if it had been included in the provisions of the Revenue Act of 1978, 
Pub. L. 95-600, to which such amendment relates, see section 201 of Pub. 
L. 96-222, set out as a note under section 32 of this title.


                    Effective Date of 1978 Amendment

    Section 703(o)(4) of Pub. L. 95-600 provided that: ``The amendments 
made by this subsection [amending this section] shall apply to taxable 
years beginning after December 31, 1976.''
    Amendment by section 421(e)(2) of Pub. L. 95-600 applicable to 
taxable years beginning after Dec. 31, 1978, see section 421(g) of Pub. 
L. 95-600, set out as a note under section 5 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 1976 Amendment

    Section 301(g)(1) of Pub. L. 94-455 provided that the amendment made 
by section 301(e) of Pub. L. 94-455 is effective for items of tax 
preferences for taxable years beginning after Dec. 31, 1975, with 
certain exceptions.
    Amendment by section 1204(c)(2) of Pub. L. 94-455 effective with 
respect to action taken under section 6851, 6861, or 6862 of this title 
where the notice and demand takes place after Feb. 28, 1977, see section 
1204(d) of Pub. L. 94-455, as amended, set out as a note under section 
6851 of this title.
    For effective date of amendment by section 1607(b)(1)(C) of Pub. L. 
94-455, see section 1608(c) of Pub. L. 94-455, set out as a note under 
section 857 of this title.


                    Effective Date of 1969 Amendment

    Amendment by Pub. L. 91-172 applicable to taxable years ending after 
Dec. 31, 1969, see section 301(c) of Pub. L. 91-172, set out as a note 
under section 5 of this title.


                    Effective Date of 1960 Amendment

    Amendment by Pub. L. 86-779 applicable with respect to taxable years 
of real estate investment trusts beginning after Dec. 31, 1960, see 
section 10(k) of Pub. L. 86-779, set out as an Effective Date note under 
section 856 of this title.


  Applicability of Certain Amendments by Pub. L. 99-514 in Relation to 
                   Treaty Obligations of United States

    For applicability of amendment by section 701(e)(3) of Pub. L. 99-
514 notwithstanding any treaty obligation of the United States in effect 
on Oct. 22, 1986, see section 1012(aa)(2) of Pub. L. 100-647, set out as 
a note under section 861 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 3, 63, 441, 536, 546, 557, 
811, 852, 857, 1362, 1398, 6013 of this title.
