Suppose a calendar year C corporation, NewCorp., Inc., was formed on January 1, 2017 and all of the shareholders filed a form 2553 to elect S corporation status on April 14,2017 with the consent of all of NewCorp. Inc.'s shareholders: Hassell, RichieCunningham, and Arnold's, Inc. (a C corporation). When is the S election effective?

Question

Quizplus · Accepted Answer

A C corporation cannot elect S corporation status if it has a shareholder that is a C corporation, as is the case with Arnold's, Inc. Therefore, the S election is never effective.

Suppose a Calendar Year C Corporation, NewCorp