RECAPTURE OF LIFO AMOUNT IN THE CASE OF ELECTIONS BY S CORPORATIONS.

SEC. 10227. RECAPTURE OF LIFO AMOUNT IN THE CASE OF ELECTIONS BY S CORPORATIONS. (a) General Rule.— Section 1363 (relating to effect of election on corporations) is amended by adding at the end thereof the following new subsection: “(d) Recapture of LIFO Benefits.— “(1) In general.— If— “(A) an S corporation was a C corporation for the last taxable year before the first taxable year for which the election under section 1362(a) was effective, and “(B) the corporation inventoried goods under the LIFO method for such last taxable year, the LIFO recapture amount shall be included in the gross income of the corporation for such last taxable year (and appropriate adjustments to the basis of inventory shall be made to take into account the amount included in gross income under this paragraph). “(2) Additional tax payable in installments.— “(A) In general.— Any increase in the tax imposed by this chapter by reason of this subsection shall be payable in 4 equal installments. “(B) Date for payment of installments.— The first installment under subparagraph (A) shall be paid on or before the due date (determined without regard to extensions) for the return of the tax imposed by this chapter for the last taxable year for which the corporation was a C corporation and the 3 succeeding installments shall be paid on or before the due date (as so determined) for the corporation’s return for the 3 succeeding taxable years. “(C) No interest for period of extension.— Notwithstanding section 6601(b), for purposes of section 6601, the date prescribed for the payment of each installment under this paragraph shall be determined under this paragraph. “(3) LIFO recapture amount.— For purposes of this subsection, the term ‘LIFO recapture amount’ means the amount (if any) by which— “(A) the inventory amount of the inventory asset under the first-in, first-out method authorized by section 471, exceeds “(B) the inventory amount of such assets under the LIFO method. For purposes of the preceding sentence, inventory amounts shall be determined as of the close of the last taxable year referred to in paragraph (1). “(4) Other definitions.— For purposes of this subsection— 101 STAT. 1330–417 “(A) LIFO method.— The term ‘LIFO method’ means the method authorized by section 472. “(B) Inventory assets.— The term ‘inventory assets’ means stock in trade of the corporation, or other property of a kind which would properly be included in the inventory of the corporation if on hand at the close of the taxable year. “(C) Method of determining inventory amount.— The inventory amount of assets under a method authorized by section 471 shall be determined— “(i) if the corporation uses the retail method of valuing inventories under section 472, by using such method, or “(ii) if clause (i) does not apply, by using cost or market, whichever is lower.” (b) Effective Dates.— (1) In general.— Except as provided in paragraph (2) the amendment made by subsection (a) shall apply in the case of elections made after December 17, 1987. (2) Exception.— The amendment made by subsection (a) shall not apply in the case of any election made by a corporation after December 17, 1987, and before January 1, 1989, if, on or before December 17, 1987— (A) there was a resolution adopted by the board of directors of such corporation to make an election under subchapter S of chapter 1 of the Internal Revenue Code of 1986, or (B) there was a ruling request with respect to the business filed with the Internal Revenue Service expressing an intent to make such an election.