ASSINGMENT 6

21-7. What requirements must be met in regard to the stock in an S corporation? What differences are allowed?

Each S Corp shareholder must be a U.S. citizen or resident. C Corp can have multiple classes of stock while S Corp are limited to one class of stock.

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? Generally, an S corporation or partnership must use a required tax year under the Internal Revenue Code. An S corporation must use a calendar year unless it obtains approval from the IRS. Other permitted tax years are one elected under section 444, a 52 -53 tax year ending with reference to a calendar year or section 444 tax year, or other tax year for which the company established business purpose. A partnership's required tax year is one which generally conforms to the partners' tax years unless it makes a section 444 election, can establish a different tax year for a business purpose, or elects a 52 -53 tax year ending with reference to a calendar or section 444 tax year. A C corporation may use either a calendar year or a fiscal year. A fiscal year is 12 consecutive months ending on the last day of any month except December. A 52 - 53 week fiscal tax year is one that varies from 52 to 53 weeks but may not end on the last day of the month. http://www.justanswer.com/tax/0zdnh-limits-placed-selection-tax-year.html#ixzz1aKuQWerx 21-26. Durra business is organized as a regular C corporation in 1986. At the beginning of the present year, Durra business 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 change to a S Corp will not cause a recapture