Final answer:
No, the subsidiary operated by Robustness, Inc., a C corporation, cannot operate as a valid S corporation, since S corporations cannot have other corporations as shareholders.
Step-by-step explanation:
In the given scenario, a wholly-owned subsidiary of a C corporation cannot operate as a valid S corporation. This is because an S corporation must meet certain qualifications set by the Internal Revenue Service (IRS), one of which is that it cannot be owned by another corporation. In this case, if the subsidiary is fully owned by Robustness, Inc., which is a C corporation, it would not be eligible for S corporation status.
When Robustness, Inc., a C corporation, wishes to organize a wholly-owned subsidiary that will operate as an insurance company, it faces certain restrictions on business entity types it can choose for that subsidiary. One such restriction pertains to S corporations. S corporations have specific eligibility requirements, one of which is that all shareholders must be individuals, certain trusts, or estates; other corporations and partnerships are not allowed as shareholders. Consequently, the subsidiary organized by Robustness, Inc. would not qualify as a valid S corporation because its sole shareholder is another corporation.