S Corporations

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Question 1
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Corporations taxed as S corporations offer the same legal protection to owners as corporations taxed as C corporations.

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Question 2
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The S corporation rules are less complex for S corporations that have earnings and profits from prior C corporation years than for S corporations that do not have earnings and profits from prior C corporation years.

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Question 3
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The same exact requirements for forming and contributing property govern S corporations and partnerships.

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Question 4
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S corporations may have no more than 50 shareholders,but members of the same family only count as one shareholder.

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Question 5
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Differences in voting powers are permissible across shares of S corporation stock as long as the shares have identical distribution and liquidation rights.

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Question 6
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Publicly traded corporations cannot be treated as S corporations.

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Question 7
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To make an S election effective as of the beginning of the current year,an S corporation must file IRS Form 2553 within 3½ months after the beginning of the year.

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Question 8
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Bobby T (95% owner)would like to elect S corporation status for DJ,Inc.but Dallas (5% owner)does not want to elect S corporation status.Bobby T cannot elect S status for DJ,Inc.without Dallas's consent.

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Question 9
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An S corporation election may be voluntarily or involuntarily terminated.

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Question 10
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An S corporation can make a voluntary revocation of an S election if shareholders holding more than 25 percent of the S corporation stock (including nonvoting shares)agree.

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Question 11
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Bobby T (75% owner)would like to terminate the S corporation status for DJ,Inc.but Dallas (5% owner)does not want to terminate the S corporation status.Bobby T can terminate the S status for DJ,Inc.without Dallas's consent.

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Question 12
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An S election is terminated if the S corporation has passive investment income in excess of 20 percent of gross receipts for three consecutive years.

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Question 13
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If an S corporation never operated as a C corporation,it may earn passive investment income without fear of an involuntary S election termination.

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Question 14
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If an S corporation shareholder sells her stock to a nonresident alien,it will automatically terminate the S election.

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Question 15
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The specific identification method is a method an S corporation may use to allocate its income across short tax years that result from an involuntary S election termination.

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Question 16
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The specific identification method and monthly allocation method are methods an S corporation may use to allocate its income across short tax years that result from an involuntary S election termination.

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Question 17
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After terminating or voluntarily revoking S corporation status,a corporation may elect it again,but it generally must wait until the beginning of the third tax year after the tax year in which it terminated the election.

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Question 18
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Like partnerships,S corporations generally determine their accounting periods and make accounting method elections at the entity level.

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Question 19
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Like partnerships and C corporations,S corporations face the same restrictions on using the cash method of accounting.

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Question 20
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An S corporation can use a non-calendar year-end if it can establish a business purpose for an alternative year end.

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