S Corp Eligibility

Question 1

T/F Husband and wife are considered one person for purposes of S Corp 100 person test?

Answer 1

T

Question 2

How many generations of family members are considered one person for purposes of S Corp 100 person test?

Answer 2

6 generations

Question 3

T/F a Nonresident alien may own S Corp shares?

Answer 3

F

Question 5

What entities may hold S Corp shares?

Answer 5

Individuals (including through single-member LLCs), estates, and qualified trusts (ESBTs and QSSTs)

Question 7

T/F Partnerships, C Corps, CRUTs, and CRATs may own S Corp shares?

Answer 7

F

Question 8

Trusts that may own S Corp shares?

Answer 8

A trust, all of which is treated as owned by an individual who is a citizen or resident of the United States.
A trust that receives a stock transfer pursuant to the terms of a will.
A trust created primarily to exercise the voting power of stock transferred to it. This does not apply to any foreign trust.

Question 9

T/F An S Corp may only have one class of stock?

Answer 9

T

Question 10

T/F The voting rights of an S Corps single class of stock may vary?

Answer 10

T

Question 11

T/F Rights to profits and assets on liquidation may differ among an S Corp’s single class of stock?

Answer 11

F, must be identical

Question 12

T/F There are circumstances where debt owned by S Corp may be treated as an impermissible second class of stock?

Answer 12

T

Question 14

T/F Foreign corporations may qualify for S status?

Answer 14

F

Question 15

T/F Financial institutions such as insurance corporations and banks that use the allowance method are prohibited from S status?

Answer 15

T

Question 16

T/F S Corps must use accrual method?

Answer 16

F. S corps do not need to use accrual method unless inventory sales are a material part of the corp’s operations, in which case it must use accrual method to calculate gross profits.

Question 17

T/F S Corps must use a calendar year as their tax year?

Answer 17

T, unless they can establish with the IRS that there is a valid business purpose to a fiscal year.

Question 18

Due date for S-Corp returns (1120-S)?

Answer 18

15th day of third month after close of taxable year (March 15)

Question 20

T/F All shareholders from all points of the year must consent to the S election?

Answer 20

T