ExpertMedium1 markMultiple Choice
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?
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
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.
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