2007 Minnesota Statutes

290.9727 TAX ON CERTAIN BUILT-IN GAINS.
    Subdivision 1. Tax imposed. For an "S" corporation electing S corporation status pursuant to
section 1362 of the Internal Revenue Code after December 31, 1986, and having a recognized
built-in gain as defined in section 1374 of the Internal Revenue Code, there is imposed a tax on
the taxable income of such S corporation, as defined in this section, at the rate prescribed by
section 290.06, subdivision 1. This subdivision does not apply to any corporation having an S
election in effect for each of its taxable years. An S corporation and any predecessor corporation
must be treated as one corporation for purposes of the preceding sentence.
    Subd. 1a. Asset transfers. In the case of the transfer of assets from a C corporation to an S
corporation as described in section 1374(d)(8) of the Internal Revenue Code, a tax is imposed
on the taxable income of the S corporation, as defined in this section, at the rate prescribed in
section 290.06, subdivision 1.
    Subd. 2. Taxable income. For purposes of this section, taxable income means taxable net
income less the deduction for net operating loss carryforwards as provided by this section.
    Subd. 3. Taxable net income. For purposes of this section, taxable net income means the
lesser of:
(1) the recognized built-in gains of the S corporation for the taxable year, as determined
under section 1374 of the Internal Revenue Code, subject to the modifications provided in section
290.01, subdivision 19f, that are allocable to this state under section 290.17, 290.191, or 290.20; or
(2) the amount of the S corporation's federal taxable income, as determined under section
1374(d)(4) of the Internal Revenue Code, subject to the provisions of section 290.01, subdivisions
19c to 19f , that is allocable to this state under section 290.17, 290.191, or 290.20.
    Subd. 4. Net operating loss carryforward. A net operating loss carryforward, as determined
under section 290.095, arising in a taxable year before the corporation elected S corporation
status, shall be allowed as a deduction against the lesser of the amounts referred to in subdivision
3, clauses (1) and (2). For purposes of determining the amount of any such loss that may be
carried to later taxable years, the lesser of the amounts referred to in subdivision 3, clauses (1)
and (2), shall be treated as taxable income.
    Subd. 5. Credit carryforward. Any credit carryforward allowed under this chapter and
arising in a taxable year in which the corporation was a C corporation is allowed as a credit
against the tax imposed by this section.
History: 1988 c 719 art 2 s 47; 1989 c 28 s 25; 1990 c 604 art 2 s 16; 1991 c 291 art 6 s
46; art 7 s 21-24; 1992 c 511 art 6 s 19; 1993 c 375 art 8 s 14; 1994 c 587 art 1 s 24; 1997 c
231 art 6 s 18; 2003 c 2 art 1 s 32