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What Are the Eligibility Requirements That a Corporation Must Meet in Order to Qualify Under Subchapter S?

Autor:   •  December 5, 2011  •  Essay  •  494 Words (2 Pages)  •  1,851 Views

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2. What are the eligibility requirements that a corporation must meet in order to qualify under Subchapter S?

Under IRS regulations, the S Corporation must:

-Be a domestic corporation;

- Have no more than 100 shareholders;

- The S Corporation must include only eligible shareholders in the election;

- The entity must have only one class of stock;

- The business must not be an ineligible corporation.

13. What limits are placed on the selection of a tax year of an S corporation? How do these limits differ from those applicable to C corporations and partnerships?

S corps is bound to the regular rules for a tax year which is either a calendar year or a fiscal year. However, they are limited to the tax year which is required to be either a year ending on December 31 or other tax year that the corporation established as business. On the other hand, C corps is allowed to select any fiscal year, and Partnership has additional option to choose the tax year of its majority partners on top of the options the S corps have.

26. Durrabusiness is organized as a regular C corporation in 1986. At the beginning of the present year, Durrabusiness elects to be an S corporation. Will the election cause a recapture of the general business investment credit taken on any property purchased while a C corporation?

The election as an S Corporation will not cause a recapture of the general business investment credit taken on property purchased while the status was a C Corp because the S Corp. election does not dispose of the assets purchased when a C Corp that lead to investment credit recapture.

53. Several individuals form Lang Corporation on May 1, 2011. The corporation


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