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Practice CPA®CPA TCP Practice Exam 3Question 51

Medium1 markMultiple Choice

Area III: Entity Tax PlanningTCPArea IIIGroup C

CPA · Question 51 · Area III: Entity Tax Planning

Shareholders owning 60% of an S Corporation's stock vote to revoke the S election on March 10, Year 1. They do not specify a date. When is the revocation effective?

Answer options:

A.

January 1, Year 1

B.

March 10, Year 1

C.

January 1, Year 2

D.

March 15, Year 1

How to approach this question

Revocation Rules: If made on or before 15th day of 3rd month (March 15), retroactive to Jan 1 unless prospective date specified.

Full Answer

A.January 1, Year 1✓ Correct

A

IRC §1362(d)(1). Revocation made on or before the 15th day of the 3rd month is effective on the 1st day of the taxable year.

Common mistakes

Thinking it is effective on the date of vote.

Question 50 All questions Question 52

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