If a Corporation Elects to Be Taxed as an S

question 56

True/False

If a corporation elects to be taxed as an S corporation,then both it and its stockholders can avoid all Federal taxes.This provision was put into the Federal Tax Code in order to encourage the formation of small businesses.

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Definitions:

Conversion Costs

The sum of labor and overhead expenses incurred in the process of converting raw materials into finished goods.

Work In Process

Goods and materials that are partially completed in the manufacturing process, representing an inventory category on the balance sheet.

Inventory

Raw materials, work-in-progress, and finished goods that are considered part of a business's assets that are ready or will be ready for sale.

Non-Value-Added Costs

Expenses that do not contribute to the value or appeal of a product or service from the perspective of the customer.