If an S Corporation Inadvertently Terminates Its Election, the IRS

question 33

Multiple Choice

If an S corporation inadvertently terminates its election, the IRS

• A)may permit the corporation to report as an S corporation even for the period that includes the termination date.
• B)will not permit the corporation to restore its S election until the completion of a five-year waiting period.
• C)will permit restoration of the S election only if the event causing the termination was not within the control of the corporation.
• D)will permit restoration of the S election if a majority of the shareholders consent to the reinstatement.

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Definitions:

Journalized

The process of recording financial transactions in a company's journal, detailing the accounts affected by each transaction.

Adjusting Entries

Are journal entries made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred, for the purpose of financial reporting accuracy.

Financial Statements

Documents that present an organization's financial activity and current financial condition, including the balance sheet, income statement, and cash flow statement.

Nominal Accounts

Accounts that are closed at the end of each accounting period, including revenue, expense, and withdrawal accounts.