For each of the following independent cases below, indicate whether the entity w

Question

For each of the following independent cases below, indicate whether the entity will be taxed as an S corporation or a C corporation for the respective period.

a. Richards Corporation, uses the calendar year as its tax year. It files an S election on March 31, 2016. If no reasonable cause is shown, how will Richards Corporation be treated for tax purposes in 2016?

b. Shareholders owning more than 50% of the stock of Harper Corporation, a qualifying calendar-year S corporation, consent to a voluntary revocation statement filed by the corporation on March 12, 2016. How will Harper Corporation be treated for tax purposes in 2016?

c. Shareholders owning more than 50% of the stock of Hazelwood Corporation, a qualifying calendar-year S corporation, consent to a voluntary revocation statement filed by the corporation on March 12, 2016. The prospective termination date is July 1, 2016. How will Hazelwood Corporation be treated for tax purposes in 2016?

d. One of the shareholders of Omni Corporation, a calendar-year S corporation, sells his stock to a Canadian individual on July 8, 2016.

Explanation / Answer

For each of the following independent cases below, indicate whether the entity will be taxed as an S corporation or a C corporation for the respective period.

a. Richards Corporation, uses the calendar year as its tax year. It files an S election on March 31, 2016. If no reasonable cause is shown, how will Richards Corporation be treated for tax purposes in 2016?

C corporation as to become an S corporation, you must file Form 2553 with the IRS. Generally, an election made after the 15th day of the 3rd month but before the end of the tax year is effective for the next tax year (unless you can show failure to file on time was due to reasonable cause).

b. Shareholders owning more than 50% of the stock of Harper Corporation, a qualifying calendar-year S corporation, consent to a voluntary revocation statement filed by the corporation on March 12, 2016. How will Harper Corporation be treated for tax purposes in 2016?

C Corporation as C corporation has no restrictions on ownerships but in S corporation ownership is restricted to not more than100 so even the filing happened before 16 th day of 3rd month of taxable year. Therefor, Harpers corporation trated as a C Corporation.

c. Shareholders owning more than 50% of the stock of Hazelwood Corporation, a qualifying calendar-year S corporation, consent to a voluntary revocation statement filed by the corporation on March 12, 2016. The prospective termination date is July 1, 2016. How will Hazelwood Corporation be treated for tax purposes in 2016?

Hazelwood treated as as C corporation as he has prospective termination date is July 1, 2016.

d. One of the shareholders of Omni Corporation, a calendar-year S corporation, sells his stock to a Canadian individual on July 8, 2016.

Omni Corporation treated as a S Corporation, S corporations. S corps are pass-through tax entities. They file an informational federal return (Form 1120S), but no income tax is paid at the corporate level. The profits/losses of the business are instead “passed-through” the business and reported on the owners’ personal tax returns. Any tax due is paid at the individual level by the owners.

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