### Question
How does the law define permitted year?


### Answer
Under *26 U.S.C. § 1378*, **permitted year** is defined as:

> a taxable year which—


(1) is a year ending December 31, or


(2) is any other accounting period for which the corporation establishes a business purpose to the satisfaction of the Secretary

#### Citation:
  - *26 U.S.C. § 1378*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter S-Tax Treatment of S Corporations and Their Shareholders > PART IV-DEFINITIONS; MISCELLANEOUS**

