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Devry Homework for, Week 5

In: Business and Management

Submitted By dcom1s
Words 643
Pages 3
21-2
What are the eligibility requirements that a corporation must meet in order to qualify under Subchapter S?
-Be a domestic corporation;
- Have no more than 100 shareholders;
- The S Corporation must include only eligible shareholders in the election;
- The entity must have only one class of stock;
- The business must not be an ineligible corporation.
21-13
What limits are placed on the selection of a tax year of an S corporation? How do these limits differ from those applicable to C corporations and partnerships?
An S Corp. must use a calendar year as their taxable year, unless certain circumstances are approved for the S Corp. by the IRS, which may allow the S Corp. to use a tax year other than the calendar year. Using a calendar year can be a challenge for businesses that changed entity type to an S Corp, and are used to using a fiscal year.

This is also contrasted from a C Corp., which can use a calendar year or a taxable year, and a partnership, which normally uses whatever the taxable year is currently used for the individual partners in the partnership.
21-26
Durrabusiness is organized as a regular C corporation in 1986. At the beginning of the present year, Durrabusiness elects to be an S corporation. Will the election cause a recapture of the general business investment credit taken on any property purchased while a C corporation?
The election as an S Corporation will not cause a recapture of the general business investment credit taken on property purchased while the status was a C Corp. The reason for this is because the S Corp. election does not dispose of the assets purchased when a C Corp that lead to investment credit recapture. The asset purchase is treated as nothing more than a change that has taken place in the form of conducting business, per the Internal Revenue Code (IRC). Also, if the S Corporation is ever terminated, that...

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