What Are the Eligibility Requirements That a Corporation Must Meet in Order to Qualify Under Subchapter S?

Q 21-2

-What are the eligibility requirements that a corporation must meet in order to qualify under Subchapter S?

-The corporation must be a small business. They also need to be a domestic corporation with no more than 100 shareholders. They must include only eligible shareholders, have only one class of stock, and must not be an ineligible corporation.

Q 21-13

-What limits are placed on the selection of a tax year of an S corporation? How do these limits differ from those applicable to C corporations and partnerships?

-An S corporation must use a calendar year unless they get approval from the IRS. A C corporation can use either a calendar year or fiscal year, which is 12 consecutive months and may end of the last day of any month except December.

Q 21-26

-Durrabusiness is organized as a regular C corporation in 1986. At the beginning of the present year, Durrabusiness elects to be an S corporation. Will the election cause a recapture of the general business investment credit taken on any property purchased while a C corporation?

-The election as an S Corporation will not cause a recapture of the general business investment credit taken on any property purchased while the status was a C Corporation because the S Corporation election doesn’t get rid of the assets purchase when a C Corporation that lead to investment credit recapture.

P 21-53

-Several individuals form Lang Corporation on May 1, 2011. The corporation begins acquiring assets on June 1, 2011, and begins business on August 1, 2011. What is the latest date that Lang can file Form 2553 requesting S corporation status?

-The Form 2553 has to be filed no more than 2 months and 15 days after the beginning of the