Identify which of the following statements is true.
A)An S corporation should have a buy-sell agreement to guard itself against an ill-advised sale of its stock.
B)The terms "small business corporation" and "S corporation" are synonymous.
C)A regular corporation has common and preferred stock outstanding on January 1. On January 2, the preferred stock is canceled in a recapitalization, leaving only common stock outstanding. The corporation can make an S election for this tax year.
D)All of the above are false.

Question

Quizplus · 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.

Identify Which of the Following Statements Is True