Hawaiian Memories, Inc.

1901 Words Jan 30th, 2011 8 Pages
A. Whether a C corporation that has preferred stock and common stock with both voting and nonvoting rights, eight shareholders among whom there are a Swedish individual and Plantation Sugar partnership, may elect to be an S corporation, under section 1361(b)(1)(B), 1361(b)(1)(C) and 1361(b)(1)(D)?
B. Whether all the shareholders must consent to the election of S status, under section 1362(a)(2)?
C. Whether the election of S status is effective if a C corporation does not meet all the requirements in the election year, under Reg §1.1362-6(2)(ii)(B)?
D. Whether an S corporation can keep its C corporation tax year, which ends in June 30, without documenting any business purpose, under the provision of section 1378(b)?
E. Whether a newly
…show more content…
E. For an S corporation converted from a C corporation, it shall recognize the LIFO recapture amount, which is the excess of FMV on the first day of S year over the adjusted basis, by including it in the gross income of the last C corporation year.
F. An S corporation has to recognize built-in gain of assets from C corporation years, which is the least of taxable income, unrealized built-in gain minus recognized built-in gain and built-in gains reduced by net operating losses from previous years.
G. A corporation cannot use net operating losses between C corporation years and S corporation years, with the only exception that net operating losses from C corporation years can reduce net recognized built-in gains from S corporation years.

List of Applicable Law:
A. §1361(a)(1); §1361(b)(1)(B); §1361(b)(1)(C); §1361(b)(1)(D); Reg §1.1361-1(I)(1)
B. §1362(a)(2)
C. §1362(b)(1); Reg §1.1362-6(2)(ii)(B)
D. §1378(b); Reg §1.1378-1(d)
E. §1363(d)(1); §1363(d)(2); §1363(d)(3)
F. §1371(b)(1); §1374(b)(2); Reg §1.1374-2(a); Reg §1.1374-1(d)
G. §1374(b)(1); Reg §1.1374-2(a)

Discussion of law:
Section 1361(a)(1) provides that an S corporation is a small business corporation with an S status election in effect. To qualify for a small business corporation, a corporation cannot have a partnership as a shareholder according to
Open Document