ExpertHard1 markMultiple Choice
CPA · Question 44 · Area V: Entity Taxation
Which of the following is a requirement for a corporation to elect S corporation status?
Which of the following is a requirement for a corporation to elect S corporation status?
Answer options:
A.
It must have only one class of stock.
B.
It must have at least 500 shareholders.
C.
It must be a foreign corporation.
D.
It can have partnerships as shareholders.
How to approach this question
S Corp Rules: Domestic, <100 shareholders, Individuals/Estates/Trusts only (no corps/partnerships), 1 Class of Stock.
Full Answer
A.It must have only one class of stock.✓ Correct
To qualify as an S corporation, the entity must be a domestic corporation, have no more than 100 shareholders (family members count as 1), have only eligible shareholders (individuals, estates, certain trusts), and have only one class of stock.
Common mistakes
Thinking partnerships can own S Corp stock.
Practice the full CPA REG Practice Exam 5
72 questions · hints · full answers · grading
More questions from this exam
Q01A CPA is representing a client, TechSolutions Inc., in an IRS examination regarding a large resea...HardQ02A tax return preparer is engaged to prepare a return for a client who has engaged in a transactio...HardQ03Which of the following statements accurately describes the disciplinary authority of a State Boar...HardQ04A taxpayer filed their Year 1 individual income tax return on March 15, Year 2. The return showed...HardQ05A taxpayer disagrees with a proposed IRS deficiency and wishes to litigate the matter. The taxpay...Hard