Identify a Disadvantage of Being an S Corporation

question 53

Multiple Choice

Identify a disadvantage of being an S corporation.

• A) Estates can be shareholders.
• B) Losses flow through immediately to the shareholders.
• C) Section 1202 treatment (qualified small business stock) is not available.
• D) Tax-exempt income flows through as excludible to shareholders.
• E) All of these are advantages of the S election.

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Definitions:

Gross Method

An accounting approach where discounts for early payment are not considered until they are actually taken by the customer.

Merchandise

Goods that are purchased for resale to customers in the normal course of business operations.

Inventory Shrinkage

The loss of products between purchase from suppliers and sale to customers, often due to theft, damage, or clerical errors.

Operating Expense

Costs associated with the day-to-day operation of a business, including rent, utilities, and salaries.