Section 1.1377-1 and 1.1377-2 apply to taxable years of an S corporation beginning after December 31, 1996, except that Sec. 1.1377-1(a)(2)(iii), and (c) Example 3 are applicable for taxable years beginning on and after May 14, 2002. [T.D. 8994, 67 FR 34401, May 14, 2002]