A Testamentary Trust Can Be an S Shareholder for Two

question 40

True/False

A testamentary trust can be an S shareholder for two years, beginning on the date the stock transfers to the trust.

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Definitions:

Time Value

The principle that money currently in hand is valued higher than an identical amount received in the future, owing to its capacity to generate earnings.

Accounting Rate of Return

A financial ratio that measures the expected profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.

Initial Investment

The amount of money used to start a project, purchase assets, or invest in securities, which is used as a basis for evaluating the potential profitability of the investment.

Discounting

A financial technique that calculates the present value of future cash flows by applying a discount rate.