Question

For each of the following indicate whether the statement is TRUE or FALSE.

a. ____ A resident alien may be a shareholder of an S-Corporation.

b. ____ An LLC can be taxed as an S-Corporation.

c. ____ A shareholder’s basis in the stock of an S-Corporation can be increased when the corporation borrows money from a bank.

d. ____ A calendar-year C-Corporation which is in its third year of operations can make an S-corporation election on May 15 which will be effective for a partial year beginning June 1st.

e. ____ Section 1245 recapture income of an S-Corporation is reported as a separately stated item shareholders via the K-1

Answer 1

a) True.

Reason:Yes, under the U.S. tax code, a foreigner, non-citizen, resident alien may be an S corp shareholder. Said another way, an S corporation can beowned by a foreigner, non-citizen,resident alien. However, an S corporation generally cannot be owned by a nonresident alien.

b)True.

Reason:A multi-owner LLC is automaticallytaxed as a partnership by default, while LLCs with one owner are taxed like sole proprietorships (one-owner businesses). However, LLCs may choose to be taxed as a C corporationor S corporation. ... But electing to betaxed as an S corporation can have tax advantages.

c)false:

Reason:The court stated that it is only after the guarantor makes a payment on the obligation that basis in the stock is increased. shareholders of an S corporation gave a bank a personal note in the amount of an S corporation's debt and the bank cancelled the debt of the S corporation.

d)True:

Reason:Form 2553 (the S Corp election form) must be filed with the IRS. It is typically due within 75 days of forming your business entity or March 15 of the following year.