Part XIV: S Corp Taxation

Question 1

Do control club rules apply to:

1. C Corps?
2. partnerships?
3. S Corps?

Answer 1

1. Yes.
2. No.
3. No.

Question 2

The election to S corp status requires what % of shareholder approval?

Answer 2

100%.

Question 3

How many shareholders can an S corp have?

Answer 3

100 or fewer shareholders.

Question 4

What individuals/groups cannot be shareholders?

Answer 4

Nonresident aliens, partnerships, and most trusts.

Question 5

How many classes of stock can an S corp have?

Answer 5

Can only have one class of stock, which can be voting or nonvoting.

Question 6

How can an S corp’s election be revoked?

Answer 6

S corp election can be revoked by a majority consensus of shareholder, including non-voting shareholders.

Question 7

An S corp election is only effective for the current tax year if…

Answer 7

1. the election is made by the 15th day of the 3rd mo. of the tax year.
2. If made after that date, the election is not effective until the beginning of the next tax year.

Question 8

An S corp’s tax year is…

Answer 8

usu. the calendar year.

Question 9

S corp elements:

Answer 9

1. Shareholders are not liable for debt.
2. Shareholders can be employees.
3. Flow-through taxation to shareholders.

Question 10

Items that increase shareholder’s basis in an S corp:

Answer 10

1. Additional contributions.

2. Share of income.

Question 11

Items that decrease shareholder’s basis in an S corp:

Answer 11

1. Distributions.

2. Share of nondeductible expenses and corp loss.