In order to make a Section 1377(a)(2) election on your 2020 Form 1120S, you will need to create a statement that says:
"Name of Company:
Tax Year:
Address:
EIN:
Pursuant to section 1377(a)(2) of the Internal Revenue Code and Regulations section 1.377-1(b), the above named corporation hereby elects to treat the taxable year ending (YOUR TAXABLE YEAR END) as if it consisted of two separate taxable years for the purposes of applying the rules under section 1377(a)(1).
The first taxable year began on (YOUR TAXABLE YEAR BEGIN DATE) and ended on (DATE OF 100% OWNERSHIP TRANSFER).
The second taxable year began on (DATE OF 100% OWNERSHIP TRANSFER) and ended (YOUR TAXABLE YEAR END).
The reason for this election is:100% ownership transfer occurred on (DATE OF 100% OWNERSHIP TRANSFER).
The corporation and each affected shareholder consent to the corporation making this election."
Additionally:
- Each affected shareholder (old owner and new owner) must sign and date the election.
- The new owner will have to print and mail the return, attaching the statement.
- K-1s should will need a heading stating: Section 1377(a)(2) Election Made.
https://www.law.cornell.edu/uscode/text/26/1377
