ExpertHard1 markMultiple Choice
CPA · Question 24 · Area V: Entity Taxation
S Corporation Status: Which of the following shareholders would cause a corporation to be INELIGIBLE to make an S election?
S Corporation Status: Which of the following shareholders would cause a corporation to be INELIGIBLE to make an S election?
Answer options:
A.
A bankruptcy estate.
B.
A grantor trust owned by a U.S. citizen.
C.
A partnership.
D.
A resident alien.
How to approach this question
Recall the list of eligible S Corp shareholders: Individuals (US/Resident), Estates, Certain Trusts. NO Corps, NO Partnerships.
Full Answer
C.A partnership.✓ Correct
C
Eligible S corporation shareholders include individuals (U.S. citizens or resident aliens), estates, and certain trusts (grantor, voting, QSST, ESBT). Partnerships and C corporations are NOT eligible shareholders. Non-resident aliens are also ineligible.
Common mistakes
Thinking partnerships can own S Corps (they can own C Corps, but not S Corps).
Practice the full CPA REG Practice Exam 2
72 questions · hints · full answers · grading
More questions from this exam
Q01A CPA is representing a client in an IRS examination regarding a complex tax shelter transaction....HardQ02A tax return preparer is facing a penalty for an understatement of tax liability on a client's re...HardQ03Taxpayer L received a Statutory Notice of Deficiency (90-day letter) from the IRS regarding a tax...HardQ04A CPA is sued for common law negligence by a third party who relied on the CPA's audit report. Th...HardQ05Which of the following communications between a CPA and a client would generally be protected by ...Hard