ExpertHard1 markMultiple Choice
CPA · Question 39 · Area V: Entity Taxation
Which of the following entities is eligible to elect S Corporation status?
Which of the following entities is eligible to elect S Corporation status?
Answer options:
A.
A partnership with 50 partners.
B.
A corporation with a C Corporation shareholder.
C.
A corporation with 90 shareholders, all of whom are U.S. citizens or resident aliens.
D.
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
C
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.
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