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Corp. ABC would like to elect to be taxed as an S corporation. ABC has 99...

Corp. ABC would like to elect to be taxed as an S corporation. ABC has 99 unrelated shareholders, plus X and Y. Under which of the following circumstances will ABC not qualify as an S corporation? a. X and Y are married. b. X and Y are mother and daughter. c. X and Y are a mother and a partnership formed by X and her daughter. d. X and Y are siblings.

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Answer #1

Answer: Option "C" is correct that says, "X and Y are a mother and a partnership formed by X and her daughter".

S corporation is a special type of a corporation in which business can avoide the double taxation. All profits and losses are passed to the shareholders of the company.

S corporation will be disqualified if:

  1. There are more than 100 shareholders
  2. There is an ineligible shareholder
  3. If there is partnership, corporation etc.

Option "c" says that partnership formed by X and her daughter, partnership is the disqualified situation for S corporation.

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