Davies Corporation Is a Calendar-Year Taxpayer That Is Owned Equally

question 15

Multiple Choice

Davies Corporation is a calendar-year taxpayer that is owned equally by Vivian, Rob, Danny, and Doug Davies. At the close of business on May 31, Rob Davies sells his 25% stock interest to Paula Bryan. Which of the following statements about the S election is correct?

• A)Paula must consent to the S election, otherwise the election terminates at the close of business on May 31.
• B)A new S election form must be filed by June 30 of the same year, with all shareholders consenting to the election. If a new S election is not filed, the election terminates on June 30 of that year.
• C)Paula has 30 days to terminate the S election, otherwise the election remains in place for the entire year and all subsequent years.
• D)None of the above statements are correct.

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Definitions:

Commodity Futures

Financial contracts obligating the buyer to purchase an asset, or the seller to sell an asset, such as a physical commodity or a financial instrument, at a predetermined future date and price.

Price

The amount of money or its equivalent paid or charged for something, often determined by supply and demand.

Standardization

The process of establishing common standards or norms to ensure that products, services, or processes are consistent and compatible.

Futures Contracts

Standardized legal agreements to buy or sell something at a predetermined price at a specified time in the future, often used for commodities or financial instruments.