If an S corporation inadvertently terminates its election, the IRS
A)may permit the corporation to report as an S corporation even for the period that includes the termination date.
B)will not permit the corporation to restore its S election until the completion of a five-year waiting period.
C)will permit restoration of the S election only if the event causing the termination was not within the control of the corporation.
D)will permit restoration of the S election if a majority of the shareholders consent to the reinstatement.

Question

Quizplus · Accepted Answer

The IRS may permit the corporation to continue to report as an S corporation even for the period that includes the termination date if the termination was inadvertent. This is allowed as long as the corporation takes timely corrective action and the IRS approves the request for relief.[1]

B, C, and D are not accurate because the waiting period for restoration of the S election after inadvertent termination is generally not five years, restoration is not dependent on the control of the corporation over the event causing termination, and restoration is not dependent on the approval or consent of the shareholders.

If an S Corporation Inadvertently Terminates Its Election, the IRS