Although It Is a Small Company, Zorn Enterprises Owns a Large

question 130

Multiple Choice

Although it is a small company, Zorn Enterprises owns a large number of inexpensive rental housing units in Texas and Louisiana. Currently, the company is a chartered C corporation, but the owners are interested in switching to be an S corporation. After consulting a lawyer, they learned that Zorn Enterprises does not qualify to be designated as an S corporation. Which of the following characteristics of Zorn Enterprises would prevent it from becoming an S corporation?

• A) The firm has fewer than 75 stockholders.
• B) The firm is chartered in one state, but owns property in another.
• C) The firm has only one class of stock, all owned by U.S. citizens.
• D) The firm receives more than 70 percent of its income from rents and other passive sources.

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