Which of the Following Statements Is Not True of S

question 23

Multiple Choice

Which of the following statements is not true of S corporations?

• A)S corporations are corporations that receive tax treatment similar to that given partnerships.
• B)Section 1231 gains and losses pass through separately to stockholders of an S corporation.
• C)The amount of S corporation losses that a shareholder of an S corporation may report on his or her tax return is limited to the basis of the stock plus any loans made by the shareholder to the corporation.
• D)If a taxpayer purchases stock in an S corporation from another shareholder during the year, the new shareholder may report the entire amount of any loss for the year attributable to the shares purchased.
• E)If an otherwise qualifying shareholder acquires 40 percent of the stock of an S corporation, the new shareholder cannot cause the corporation to lose its S corporation election.

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Definitions:

Common Shares

Equity securities that represent ownership in a company, entitling holders to vote at shareholder meetings and receive dividends.

Preferred Shares

A type of stock that provides a fixed dividend before any dividends are paid to common stockholders and often carries no voting rights.

Basic Earnings

The net income divided by the weighted average number of shares outstanding, representing a company's earnings per share without any adjustments.

Common Shares

Equity securities that represent ownership interests in a corporation, providing voting rights and potential dividends to shareholders.