Which of the following entities is eligible to elect S Corporation status?

Answer options:

A partnership with 50 partners.

A corporation with a C Corporation shareholder.

A corporation with 90 shareholders, all of whom are U.S. citizens or resident aliens.

A corporation with preferred and common stock.

How to approach this question

S Corp Rules: 1. Domestic Corp. 2. Max 100 shareholders. 3. Only individuals (US/Resident), Estates, certain Trusts. NO Corps/Partnerships as owners. 4. One class of stock.

Full Answer

C.A corporation with 90 shareholders, all of whom are U.S. citizens or resident aliens.✓ Correct

To qualify as an S Corporation, the entity must be a domestic corporation with no more than 100 shareholders. Shareholders must be individuals (citizens or residents), estates, or certain trusts. Corporations and partnerships cannot be shareholders. It can only have one class of stock.

Common mistakes

Thinking a partnership can own an S Corp, or forgetting the one class of stock rule.

Question 38 All questions Question 40

Practice the full CPA REG Practice Exam 3

72 questions · hints · full answers · grading

More questions from this exam

Q01A CPA is preparing an original tax return for a client who is claiming a refund based on a positi...Hard Q02A practitioner is representing a taxpayer in an IRS examination. The taxpayer has a 25% ownership...Hard Q03A tax return preparer willfully attempts to understate the tax liability on a client's return by ...Hard Q04Which of the following scenarios would most likely result in the assessment of a penalty for fail...Hard Q05Regarding the disciplinary authority of State Boards of Accountancy, which of the following state...Hard

View all 72 questions →