Identify a Disadvantage of Being an S Corporation

question 12

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) None of the above is a disadvantage of the S election.

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Definitions:

Derivative Securities

Financial assets that represent claims to another financial asset.

Underlying Assets

The financial assets or instruments upon which financial derivatives are based.

Insurance Policy

A contract between an insurer and a policyholder that specifies the terms and conditions under which the insurer agrees to compensate the policyholder for loss caused by specific events.

Limited Liability Corporation

A business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation, protecting owners' personal assets from business debts.