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Less: Cash distribution (53,000) Not taxable Basis at 12/31/97 $ 2,000 Choices "a", "b", and "c" are incorrect. Cash distributions (unless to the extent they exceed basis, in
which case there would be a capital gain) and tax-exempt dividends are not income to the shareholder. CPA-02277 Type1 M/C 134. CPA-02277 A-D R98 #13 Corr Ans: A PM#40 R 3-99 Page 53 Dart Corp., a calendar-year S corporation, had 60,000 shares of voting common stock and 40,000 shares
of nonvoting common stock issued and outstanding. On February 23, 1997, Dart filed a revocation
statement with the consent of shareholders holding 30,000 shares of its voting common stock and 5,000
shares of its nonvoting common stock. Dart's S corporation election:
d. Did not terminate.
Terminated as of January 1, 1997.
Terminated on February 24, 1997.
Terminated as of January 1, 1998. CPA-02277
Choice "a" is correct. Dart's S corporation election did not terminate.
Rule: An S corporation may have only one class of stock. A difference in voting privileges (i.e., voting
and non-voting common stock) does not constitute another class of stock, and they are combined for S
election (and revocation) purposes.
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This note was uploaded on 06/14/2013 for the course ACCOUNTING Regulation taught by Professor Becker during the Fall '10 term at Keller Graduate School of Management.
- Fall '10
- The Land