Title 26, Internal Revenue CodeRelease 119-110
§1372 Partnership Rules to Apply for Fringe Benefit Purposes
Title 26 › Subtitle A — Income Taxes › CHAPTER 1 — NORMAL TAXES AND SURTAXES › Subchapter S — Tax Treatment of S Corporations and Their Shareholders › PART III — SPECIAL RULES › § 1372
Summary
Treat S corporations as partnerships for fringe benefits, and treat any 2‑percent shareholder as a partner. A 2‑percent shareholder, on any day during the S corporation’s taxable year, owns or is treated under section 318 as owning more than 2% of stock or voting power.
Full Legal Text
Title 26, §1372
Internal Revenue Code, Source: USLM XML via OLRC
(a)General rule
For purposes of applying the provisions of this subtitle which relate to employee fringe benefits—
(1)the S corporation shall be treated as a partnership, and
(2)any 2-percent shareholder of the S corporation shall be treated as a partner of such partnership.
(b)2-percent shareholder defined
For purposes of this section, the term “2-percent shareholder” means any person who owns (or is considered as owning within the meaning of section 318) on any day during the taxable year of the S corporation more than 2 percent of the outstanding stock of such corporation or stock possessing more than 2 percent of the total combined voting power of all stock of such corporation.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Prior Provisions
A prior section 1372, added Pub. L. 85–866, title I, § 64(a), Sept. 2, 1958, 72 Stat. 1650; amended Pub. L. 87–29, § 2, May 4, 1961, 75 Stat. 64; Pub. L. 89–389, §§ 2(b)(2), 3(a), Apr. 14, 1966, 80 Stat. 114; Pub. L. 91–683, § 1(a), Jan. 12, 1971, 84 Stat. 2067; Pub. L. 94–455, title IX, § 902(c)(3), title XIX, §§ 1901(a)(149), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1609, 1788, 1834; Pub. L. 95–600, title III, § 343, Nov. 6, 1978, 92 Stat. 2843; Pub. L. 95–628, § 5(a), (b), Nov. 10, 1978, 92 Stat. 3628, related to manner, effect, termination, etc., of an election not to be subject to taxes imposed under this chapter, prior to the general revision of this subchapter by section 2 of Pub. L. 97–354.
Statutory Notes and Related Subsidiaries
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1982, except that in the case of a taxable year beginning during 1982, section 1362(d)(3), 1366(f)(3), and 1375 of this title shall apply and subsec. (e)(5) of this section as in effect on the day before Oct. 19, 1982, shall not apply, see section 6(a), (b)(3), of Pub. L. 97–354, set out as a note under section 1361 of this title. For additional provisions relating to the treatment of existing fringe benefit plans and the application of this section, see section 6(d) of Pub. L. 97–354, set out as a note under section 1361 of this title.
Reference
Citations & Metadata
Citation
26 U.S.C. § 1372
Title 26, Internal Revenue Code
Last Updated
Sep 22, 2026
Release point: 119-110