Subchapter S Revision Act of 1998

TABLE OF CONTENTS:

Title I: Subchapter S Expansion

Subtitle A: Eligible Shareholders of an S Corporation

Subtitle B: Qualification and Eligibility Requirements

of S Corporations

Subtitle C: Taxation of S Corporation Shareholders

Subtitle D: Effective Date

Title II: Sense of the House of Representatives Resolution

Subchapter S Revision Act of 1998 - Title I: Subchapter S Expansion - Subtitle A: Eligible Shareholders of an S Corporation - Amends the Internal Revenue Code to allow certain members of a family to be treated as one shareholder of an S corporation (electing small business corporation). Permits nonresident aliens to be S corporation shareholders if the corporation is engaged in a U.S. trade or business. Subjects such aliens' effectively-connected U.S. income to withholding tax.

Subtitle B: Qualification and Eligibility Requirements of S Corporations - Prohibits, with respect to S corporations, treating: (1) qualified preferred stock as a second class of stock; and (2) a person as a shareholder by reason of holding such stock.

(Sec. 112) Permits financial institutions to hold convertible (safe harbor) debt.

(Sec. 113) Repeals: (1) the characterization of excessive passive investment income as a termination event; and (2) the passive income capital gain category.

(Sec. 115) Permits: (1) an S corporation to make charitable contributions of inventory and scientific property used to care for the ill, the needy, or infants; and (2) S corporation shareholders to increase the basis of their stock by the excess of the charitable contribution over the property's basis.

(Sec. 116) Makes other-than health insurance fringe benefits nontaxable for S corporation two-percent shareholders.

Subtitle C: Taxation of S Corporation Shareholders - States that a loss recognized by a shareholder in a complete liquidation of an S corporation shall be treated as an ordinary loss to the extent the shareholder's stock basis is attributable to ordinary income from such liquidation.

Subtitle D: Effective Date - Sets forth the effective date for provisions of this Act.

Title II: Sense of the House of Representatives Resolution - Expresses the sense of the House of Representatives against treating the conversion of certain large C corporations to S corporations as taxable liquidations.