Accounting

Tax 655

11-5 b. Domestic corporation, c. Partnership where all the partners are U.S citizen

f. Nonresident alien individual

11-6 a. Regular(income) tax, b. Accumulated earnings tax, c. Corporate alternative minimum tax

e. Personal holding company tax

11-7 a. No.

b. Yes.

c. No. Owning 100% stock of a subsidiary does not terminate the S election.

d. No.

e. No. Earning tax-exempt income will not terminate the S election

11-8

11-9

An S corporation that revokes or terminates its S election must wait five tax years before

making a new election. This delay applies unless the IRS consents to an earlier reelection.

Regulation Sec. 1.1362-5(a) indicates that permission for an early reelection can occur when (1)

more than 50% of the corporation's stock is owned by persons who did not own stock on the date of

the termination or (2) the termination was caused by events not reasonably within the control of the

corporation or the shareholders owning a substantial interest in the corporation and was not part of a

plan to terminate the election involving the corporation or its shareholders.

11-10

An S corporation generally must adopt a permitted tax year (which normally is a calendar

year or a 52-53 week year) as its tax year. Alternatively, it can adopt a fiscal year for which it has

established the necessary business purpose (e.g., natural business year). If the corporation uses the

business purpose exception as authority to adopt a fiscal year, IRS approval of the tax year is

required. Alternatively, the S corporation can elect under Sec. 444 to adopt or change to a tax year

with a limited deferral period (e.g., three months or shorter period), if the adoption or change does

not result in a greater deferral period than does the year presently being used. The adoption of a

fiscal year with a limited deferral period is permitted in the corporation's initial tax...