The use of an S corporation election can dramatically affect the tax consequences of owning a corporate business. Focus on the requirements that must be satisfied and the process necessary to make this tax election. Once the election is made, it can be voluntarily or involuntarily be terminated. Discuss possible relief for inadvertent terminations. Where termination is voluntary, tax planning opportunities will be identified and explained.
Learning Objectives
• Identify and discuss the requirements that must be satisfied to make the S corporation election
• Identify the process that must be followed to make the election, including when the election must be made and the consequences of a defective election
• Identify the possible application of the inadvertent termination rule to avoid an unplanned termination
• Recognize limitation on re-electing after a termination
Major Topics
• Qualified shareholder requirement
• Trusts and Estates as shareholders
• Qualified tax-exempt shareholders
• Special rules for counting the number of shareholders
• One class of stock requirement
• Indirect preferences creating a risk of failing one class of stock requirement
• Disqualified corporations
• Making an effective S corporation election
• Relief for late or defective elections
• Inadvertent termination relief for involuntary terminations
• How to voluntarily revoke an S corporation election
• Re-election after termination
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