Question 1

The passive income test relating to an S corporation election is applied

Accepted Answer

The passive income test relating to an S corporation election is applied annually, specifically for the corporation's tax year.

Question 2

Identify which of the following statements is false.

Accepted Answer

The correct waiting period before making a new S election after a non-inadvertent termination is generally five tax years, not ten.

Question 3

Even if the termination of an S election is considered to be inadvertent,the election to terminate is irrevocable.

Accepted Answer

If the termination of an S election is considered inadvertent, the IRS may allow the corporation to retain its S corporation status, provided certain conditions are met and corrective actions are taken.

Question 4

The election of Subchapter S status by a corporation is valid only if all shareholders consent to the election.

Accepted Answer

For a corporation to elect Subchapter S status, all shareholders must consent to the election, ensuring that they are all in agreement with the tax implications and requirements of operating as an S corporation.

Question 5

Identify which of the following statements is true.

Accepted Answer

The answer of Identify which of the following statements is...

Question 6

Helmut and Sergei own all the stock of Zappo Corporation,a calendar-year domestic corporation.On January 30 of the current year,Sergei sells his entire interest in the Zappo stock to Nils.All three individuals are U.S.citizens.Can an S election be made for the current year?

Accepted Answer

The answer of Helmut and Sergei own all the stock...

Question 7

Identify which of the following statements is true.

Accepted Answer

A) False, only a majority of shareholders need to consent to a revocation.
B) False, a revocation can only be prospective, not retrospective.
C) True, if an S corporation does not have Subchapter C earnings and profits, it cannot have excess passive income and therefore will not lose its S election status due to that reason. 
D) False, not all statements are true.

Question 8

Swamp Corporation,a calendar-year taxpayer,has been an S corporation for several years.However,the corporation has become quite profitable,and management feels that it would be advantageous to make a public stock offering.What are Swamp Corporation's options concerning the date of revocation of the S election?

Accepted Answer

The answer of Swamp Corporation,a calendar-year taxpayer,has been an S...

Question 9

A corporation must make an S election for the current year after March 15 in the case of a calendar-year corporation.

Accepted Answer

A corporation must make an S election for the current year by March 15 in the case of a calendar-year corporation.

Question 10

On June 30 of the current year,the S election of Great Corporation is terminated,thus creating a six-month S short year and a six-month C short year.Great Corporation is a calendar-year taxpayer.The S short-year return is due

Accepted Answer

The S short-year return is due on March 15 of the next year, which is the usual due date for S corporation returns. Even though it is a short year, the due date remains the same.

Question 11

Davies Corporation is a calendar-year taxpayer that is owned equally by Vivian,Rob,Danny,and Doug Davies.At the close of business on May 31,Rob Davies sells his 25% stock interest to Paula Bryan.Which of the following statements about the S election is correct?

Accepted Answer

The S corporation status is not automatically terminated upon the sale of stock to a new shareholder. The new shareholder, Paula, does not need to consent to the S election for it to remain in effect, nor does a new S election need to be filed by June 30. The S election remains in place unless specific actions are taken to terminate it, which are not solely dependent on the consent of a new shareholder within a 30-day period.

Question 12

Garret and Hans own all the stock of GH Corporation.Garret sells all his GH stock to Olga on February 12.The next day,GH makes an S election.For the election to apply to the current year,who must consent to the election?

Accepted Answer

The answer of Garret and Hans own all the stock...

Question 13

A C corporation was formed five years ago and is a fiscal-year taxpayer with a June 30 year-end.The C corporation wants to make an S election for its tax year beginning in the current year.The election must be made by ________ (assuming permission can be obtained to continue using the fiscal year from the IRS).

Accepted Answer

The S election must generally be made no later than the 15th day of the third month of the corporation's tax year in order for the election to be effective for that year. Since the C corporation has a June 30 year-end, its tax year begins on July 1, so the deadline for making the S election for the current year is September 15.

Question 14

Which of the following conditions will not cause an S election to be terminated?

Accepted Answer

Failing to file a timely tax return can result in penalties and interest, but it is not a condition that will cause an S election to be terminated. Exceeding the 100-shareholder limit or creating a second class of stock with a dividend preference will both result in termination of S election. Selecting an improper tax year can also result in termination, although the IRS may allow the corporation to make a corrective election to avoid termination.

Question 15

If an S corporation inadvertently terminates its election,the IRS

Accepted Answer

If an S corporation inadvertently terminates its election, the IRS may permit the corporation to report as an S corporation even for the period that includes the termination date. This is known as an automatic extension period of up to 3 years, during which the corporation can still be treated as an S corporation. However, if the corporation fails to correct the termination within the automatic extension period, it will lose its S corporation status and will need to wait for a period of 5 years before it can re-elect S corporation status.

Question 16

Which of the following would terminate a Subchapter S election?

Accepted Answer

A partnership cannot be a shareholder in an S corporation, which means if a partnership becomes a shareholder, it would terminate the Subchapter S election.

Question 17

April Corporation's Subchapter S election was voluntarily terminated for 2010.The first year that April would be eligible to reelect S corporation status is

Accepted Answer

The answer of April Corporation's Subchapter S election was voluntarily...

Question 18

All shareholders must consent to the revocation of S status.

Accepted Answer

Only a majority of the shareholders' consent is required to revoke the S corporation status, not all shareholders.

Question 19

Identify which of the following statements is true.

Accepted Answer

A buy-sell agreement can protect an S corporation from unwanted sale of its stock by outlining certain procedures that must be followed before anyone can sell their shares. The other statements are false: B) "Small business corporation" is just another term for a corporation that meets S corporation requirements, but it is not the same as an S corporation. C) Once a corporation cancels any preferred stock, it is no longer eligible to be an S corporation for that year.

Question 20

Krause Corporation makes an S election,believing that it has no current or accumulated E&P.However,after an IRS audit,Krause is found to have failed the passive investment income test for three consecutive years and also to have a SubChapter E&P balance from its three pre-election tax years.The IRS will

Accepted Answer

If the IRS determines that the termination was inadvertent, it may allow the S election to continue if the corporation takes corrective actions, such as distributing the Subchapter C E&P.

Quiz 11: US Corporations

The passive income test relating to an S corporation election is applied

Identify which of the following statements is false.

Even if the termination of an S election is considered to be inadvertent,the election to terminate is irrevocable.

The election of Subchapter S status by a corporation is valid only if all shareholders consent to the election.

Identify which of the following statements is true.

Helmut and Sergei own all the stock of Zappo Corporation,a calendar-year domestic corporation.On January 30 of the current year,Sergei sells his entire interest in the Zappo stock to Nils.All three individuals are U.S.citizens.Can an S election be made for the current year?

Identify which of the following statements is true.

A corporation must make an S election for the current year after March 15 in the case of a calendar-year corporation.

On June 30 of the current year,the S election of Great Corporation is terminated,thus creating a six-month S short year and a six-month C short year.Great Corporation is a calendar-year taxpayer.The S short-year return is due

Davies Corporation is a calendar-year taxpayer that is owned equally by Vivian,Rob,Danny,and Doug Davies.At the close of business on May 31,Rob Davies sells his 25% stock interest to Paula Bryan.Which of the following statements about the S election is correct?

Garret and Hans own all the stock of GH Corporation.Garret sells all his GH stock to Olga on February 12.The next day,GH makes an S election.For the election to apply to the current year,who must consent to the election?

Which of the following conditions will not cause an S election to be terminated?

If an S corporation inadvertently terminates its election,the IRS

Which of the following would terminate a Subchapter S election?

April Corporation's Subchapter S election was voluntarily terminated for 2010.The first year that April would be eligible to reelect S corporation status is

All shareholders must consent to the revocation of S status.

Identify which of the following statements is true.