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Screen CT1377 - Connecticut IRC Section 1377(a)(2) Election (1120)
Show all hidden content
Overview
Enter information in this input screen if the corporation has made a terminating election under IRC 1377(a)(2) to treat its taxable year as though it consisted of separate taxable years, the first year of which ends at the close of the day on which the shareholder’s entire interest in the S Corporation is terminated. To make the IRC 1377(a)(2) election, go to
View
and select Shareholder Information
. On the Shareholder tab, select Change of Ownership
and enter dates in the IRC 1377
or 1368 Dates only
field. For more information about entering shareholder information, review the F1 help for the Shareholder tab.The application generates the Connecticut Amounts Per IRC 1377(a)(2) Worksheet, which allocates income modifications and credits to the IRC 1377(a)(2) periods as entered in the CT1377 screen.
The application also generates the Connecticut Shareholder Allocation Per IRC 1377(a)(2) Election Worksheet for each shareholder, which calculates the shareholder’s portion of income modifications and credits as allocated to each termination period based on the shareholder’s ownership percentage for the respective period. The application transfers the amounts in the
Total
column of this worksheet to the respective line on Form CT-1120SI, Part V - Member’s Share of Connecticut Modifications and Schedule CT-K-1 for each shareholder. This worksheet is included in the shareholder package at print time.General Information
Calculate Connecticut 1377(a)(2) election
Enter
X
to calculate and print the Connecticut Amounts Per IRC 1377(a)(2) Worksheet and Connecticut Shareholder Allocation Per IRC 1377(a)(2) Election Worksheet. If this field is blank, then these two worksheets do not calculate or print.note
The application automatically marks this field if any amounts are entered in this screen.
Date of shareholder termination
These fields show the dates entered in the
IRC
1377 or 1368 Dates Only
fields in Shareholder Information. These fields cannot be edited. To change the dates in these fields, access Shareholder Information and enter new dates.1377(a)(2) election amounts
Enter the amount allocable to each termination period for each item in these fields. Enter amounts allocable to the first termination period in the first column and amounts allocable to the second termination period in the second column, if applicable.
After the IRC 1377(a)(2) election termination dates are entered in Shareholder Information and the
Calculate Connecticut 1377(a)(2) election
field in this screen is marked, the application allocates all items to the shareholders based on information entered in this input screen. Therefore, an amount allocable to the termination periods entered in Shareholder Information must be entered for all items in this input screen. If a field is blank, the application assumes the amount allocable for that period is zero.note
It is unnecessary to enter amounts allocable to the period from the last termination date to the end of the year. The application automatically determines the amount allocable to this period by subtracting the amount entered in each termination period from the total amount for each item, respectively. The application then allocates each item to the shareholders based on their ownership percentage for the period.
Shareholder 1 owns 7,500 shares of an S Corporation for the entire period. Shareholder 2 owns 2,500 shares and terminates his entire interest on March 31 of the current year. The corporation’s only item that can be allocated is interest on U.S. obligations of $100,000, of which $25,000 can be allocated for the period from January 1 to March 31, and $75,000 can be allocated from April 1 to December 31.
In this case, to make the IRC 1377(a)(2) election, simply enter
3/31/XX
in the First Termination Date
field in Shareholder Information, and $25,000
in the first subtraction field of the CT1377 screen, Interest on US obligations
. The application calculates shareholder ownership percentages and allocates U.S. interest to each shareholder as follows:Ownership Percentage:
Apr. 1 - Dec. 31 | 100% | 0% |
|---|---|---|
Date | Shareholder 1 | Shareholder 2 |
Jan. 1 - Mar. 31 | 75% (7,500/10,000) | 25% (2,500/10,000) |
U.S. Interest Allocation:
Date | Shareholder 1 | Shareholder 2 |
|---|---|---|
Jan. 1 - Mar. 31 | $25,000 X 75% = $18,750 | $25,000 X 25% = $6,250 |
Apr. 1 - Dec. 31 | $75,000 X 100% = 75,000 | $75,000 X 0% = 0 |
Total | $93,750 | $6,250 |
The application transfers $93,750 and $6,250 to Form CT-1120SI, Page 4, Part V, line 5, Interest income, and Schedule CT K-1, line 5, Interest income, for Shareholder 1 and Shareholder 2, respectively.