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Q, Inc. is incorporated under the laws of Illinois by its two shareholders, A and B. How will Q, Inc. be classified for tax purposes? What result if A and B elect S Corporation status for Q, Inc?
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Q, Inc. will be classified as C Corporation type of business entity for tax purposes.It is default type of classification when incorporating a company.C corps are subject to double taxation i.e., First it is taxed as Corporate and again on the owner's personal income tax returns if the company distributes dividends to its shareholders.

If A and B elect S Corporation status,then shareholders will just report their share of business income and losses in their personal returns.This is called as pass through taxation.

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