National Tax 432 Chapter 21 Solutions

National Tax 432 Chapter 21 Solutions - 1 Corporations...

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Designation as S Corporation 1. Corporations qualifying under Subchapter S are specifi cally designated as S corporations in contrast to regular corporations that are designated as C corporations. Qualifi cation Requirements 2. For a corporation to qualify under Subchapter S it must be a “small business corporation.” Five basic requirements must be met in order to be classifi ed as a “small business corporation.” An S corporation must: (1) be a domestic corporation, (2) have no more than 100 shareholders, (3) have only eligible shareholders, (4) have only one class of stock, and (5) not be an ineligible corporation. Domestic Corporation Defi nition 3. A domestic corporation is a corporation created or organized in the United States or under the law of the United States or any State. Eligible Corporations 4. No. An S corporation must be a domestic corporation—created or organized in the United States. Divorced Shareholders 5. All members of the family count as one shareholder, including former spouses. Eligible Shareholders 6. Only individuals, estates, and certain trusts are eligible to hold stock in an S corporation. Specifi cally excluded are nonresident aliens, foreign trusts, and corporations. Stock Requirements 7. An S corporation is allowed to have only one class of stock. Differences in voting rights among the shares are allowed. The shares must be identical as to the rights of the holders in the profi ts and assets of the corporation. Straight Debt Instrument Defi nition 8. A straight debt instrument means a written unconditional promise to pay on demand or on a specifi ed date a sum certain in money so long as the interest rate and payment dates are fi xed. S corporations are not allowed to have more than one class of stock and straight debt will not be treated as a second class of stock. Ineligible Corporations
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This note was uploaded on 11/22/2011 for the course ACC 432B taught by Professor Wolod during the Fall '11 term at National.

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National Tax 432 Chapter 21 Solutions - 1 Corporations...

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