AC553_W6_Assignment_Solution - choose the tax year of its...

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Week 6 Assignment Solutions 21-2 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 classified 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 (partnerships, most corporations, and some types of trusts are not eligible to own S corp. stock), (4) have only one class of stock, and (5) not be an ineligible corporation. 21-13 S corporations are bound to the regular rules for a tax year—the tax year must be either a calendar year or a fiscal year. However, S corporations are limited to the extent that the tax year is required to be either a year ending December 31 or any other tax year for which the corporation establishes a business purpose. C corporations are allowed to select any fiscal year. A partnership has an additional option over the S corporation in that it is allowed to
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Unformatted text preview: choose the tax year of its majority partners. 21-26 No recapture of the general business credit will take place. The election is a mere change in the form of organization and not a disposition of property. However, if the S corporation makes an early disposition of any property for which a credit was taken by the corporation prior to the effective date of its election, the S corporation remains liable for the general business credit recapture. 21-53 July 15, 2011—The 15th day of the third month after May 1, 2011. Shareholders were acquired on May 1. 21-63 The shareholder's loss is determined on a per-share, per-day basis and is $30,000 ($300,000 × 30% × 1/3). The loss deduction is limited to $20,000 because that is the shareholder's basis in the corporation, assuming the passive loss rules do not apply....
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