Question

Business Entity

9. Which of the following events does not terminate an S corporation election? One of the corporation's 100 shareholders transfers his shares to three unrelated friends. a. b. The corporation issues a nonvoting preferred class of stock that entitles the holder to receive a greater amount on liquidation. 51% of the shareholders must consent to file a c, revocation. d. One of the corporation's 100 shareholders marries and transfers half of her shares to her husband. 10. The built-in gains tax under IRC section 1374 was enacted to: a. Ensure recognition of all gain. b. Aid beginning corporations that elect S status by deferring the tax on built- in gains for 10 years. c. Prevent C corporations that were planning distributions of appreciated property from avoiding double taxation by converting to S corporations before making the distributions. d. Ensure recognition of all gains on the distribution of appreciated property purchased by the S corporation.

Answer 1

S CORP cannot have more than 100 shareholder if one of shareholder transfer shares to three of his friends it would result into more than 100 shareholders resulting in termination.

S corp cannot have preferred class of shareholder .

You can revoke an S corp election by taking a shareholder vote on the matter. A simple majority will result in termination.

HUSBAND ,WIFE ,THEIR CHILDREN, SPOUSE OF THEIR CHILDREN , GRANDCHILDREN AND SPOUSES ARE considered as ONE for purpose of counting 100 shareholders.wife transferring half share to husband will not result in more than 100 shareholders hence no termination of S corp will happen in this case.

ANSWER D