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The consent of an estate must be made by an executor or administrator of the estate. Where the stock of the corporation is held by an eligible trust, each deemed owner who is considered to be a shareholder must consent to the election. Where stock is held by a trust to which the stock was transferred pursuant to the terms of a will, the estate of the testator that is considered to be the shareholder must consent to the election. Temp. Reg. §18.1362-2(b)(2).Generally, the IRS will give notification of acceptance of an S corporation election within 60 days after Form 2553 has been filed. Form 1120S (U.S. Income Tax Return for an S Corporation) is not to be filed until notification of acceptance is received.The IRS has provided procedures whereby companies can obtain relief from the late filing of an S election. Revenue Procedure 2003-43 establishes broader relief provisions than previous procedures. An entity and its shareholders must meet three requirements: (1) on the first day that the entity desired to be an S corporation, it fails to qualify as an S corporation solely because of the failure to file Form 2553 on a timely basis; (2) the entity has reasonable cause for its failure to make the timely S election; and (3) the entity must file the application for relief within prescribed time limits and the shareholders have reported their share of the corporation’s income consistent with the S election on all affected returns.Extension of Time for Filing ConsentsAn extension of time for filing consents is permitted if there is reasonable cause for the failure to file the consent on time and the interests of the government will not be jeopardized. The extension applies only to shareholders’ consents; the S election for the tax year must have been timely filed. New consents must be filed within such extended period of time as may be granted by the Internal Revenue Service by all persons who were shareholders of the corporation at any time during the tax year and by all persons who were shareholders of the corporation within the period beginning after such tax year and ending before the date on which an extension of time is granted. Temp. Reg. §18.1362-2(c).For example, an extension may be required where the corporation does not yet have shareholders when it is first required to make the election and an extension is needed until shareholders are obtained. See Q.A. Calhoun, 74-1 USTC¶9104, 370 F.Supp. 434 (DC Va. 1973).While S corporation status is limited to small business corporations, the size is measured not in gross receipts, net income, or number of employees, but in the number of shareholders.¶21,085 CONTRIBUTIONS TO THE CORPORATIONSection 351 allows contributions to the S corporation to be tax free to the contributing shareholder provided three conditions are met: (1) property is transferred to the corporation, (2) stock is received by the contributing shareholder, and (3) contributing shareholders receive 80 percent control of the corporation.
Just as in the case of a C corporation, there are three exceptions to the nontaxability of Section 351. Where services are provided by an individual for stock in the S corporation, the individual
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Corporation, Taxation in the United States, S corporation