§ 448.
(a)
General rule
Except as otherwise provided in this section, in the case of a—
(2)
partnership which has a C corporation as a partner, or
taxable income shall not be computed under the cash receipts and disbursements method of accounting.
(c)
Gross receipts test
For purposes of this section—
(3)
Special rules
For purposes of this subsection—
(A)
Not in existence for entire 3-year period
(D)
Treatment of predecessors
(4)
Adjustment for inflation
In the case of any taxable year beginning after December 31, 2018, the dollar amount in paragraph (1) shall be increased by an amount equal to—
(A)
such dollar amount, multiplied by
(B)
the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting “calendar year 2017” for “calendar year 2016” in subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not a multiple of $1,000,000, such amount shall be rounded to the nearest multiple of $1,000,000.
(d)
Definitions and special rules
For purposes of this section—
(1)
Farming business
(B)
Timber and ornamental trees
(2)
Qualified personal service corporation
The term “qualified personal service corporation” means any corporation—
(A)
substantially all of the activities of which involve the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting, and
(B)
substantially all of the stock of which (by value) is held directly (or indirectly through 1 or more partnerships, S corporations, or qualified personal service corporations not described in paragraph (2) or (3) of subsection (a)) by—
(i)
employees performing services for such corporation in connection with the activities involving a field referred to in subparagraph (A),
(ii)
retired employees who had performed such services for such corporation,
(iii)
the estate of any individual described in clause (i) or (ii), or
(iv)
any other person who acquired such stock by reason of the death of an individual described in clause (i) or (ii) (but only for the 2-year period beginning on the date of the death of such individual).
To the extent provided in regulations which shall be prescribed by the Secretary, indirect holdings through a trust shall be taken into account under subparagraph (B).
(4)
Special rules for application of paragraph (2)
For purposes of paragraph (2)—
(A)
community property laws shall be disregarded,
(B)
stock held by a plan described in section 401(a) which is exempt from tax under section 501(a) shall be treated as held by an employee described in paragraph (2)(B)(i), and
(C)
at the election of the common parent of an affiliated group (within the meaning of section 1504(a)), all members of such group may be treated as 1 taxpayer for purposes of paragraph (2)(B) if 90 percent or more of the activities of such group involve the performance of services in the same field described in paragraph (2)(A).
(5)
Special rule for certain services
(A)
In general
In the case of any person using an accrual method of accounting with respect to amounts to be received for the performance of services by such person, such person shall not be required to accrue any portion of such amounts which (on the basis of such person’s experience) will not be collected if—
(i)
such services are in fields referred to in paragraph (2)(A), or
(ii)
such person meets the gross receipts test of subsection (c) for all prior taxable years.
(6)
Treatment of certain trusts subject to tax on unrelated business income
(7)
Coordination with section 481
(8)
Use of related parties, etc.
(Added [Pub. L. 99–514, title VIII, § 801(a)], Oct. 22, 1986, [100 Stat. 2345]; amended [Pub. L. 100–647, title I, § 1008(a)(1)], (2), (7)–(9), title VI, § 6032(a), Nov. 10, 1988, [102 Stat. 3436], 3437, 3695; [Pub. L. 107–147, title IV, § 403(a)], Mar. 9, 2002, [116 Stat. 40]; [Pub. L. 115–97, title I, § 13102(a)(1)]–(4), Dec. 22, 2017, [131 Stat. 2102].)