Question

An S corporation is subject to the following tax(es).

1) Built-in gains tax.
2) Corporate income tax (§ 11).
3) Alternative minimum tax.
4) None of these choices apply to S corporations.

Answer 1

An S corporation is only subject to built-in gains tax and is not subject to corporate income tax (§ 11) or alternative minimum tax, as these do not apply to S corporations. Instead, S corporations benefit from pass-through taxation, where shareholders report income or losses on their personal tax returns.

Step-by-step explanation:

An S corporation is subject to certain taxes, but not all forms that apply to other corporations. The correct answer to the question about the taxes an S corporation is subject to is:

1. Built-in gains tax
2. Corporate income tax (§ 11) does not apply to S corporations.
3. Alternative minimum tax is also not applicable to S corporations since the Tax Cuts and Jobs Act of 2017.
4. Therefore, none of these other choices apply to S corporations, making the correct answer (4) None of these choices apply to S corporations.

S corporations are known for their pass-through taxation, meaning that the income, losses, deductions, and credits pass through the corporation to the shareholders, who then report this information on their personal tax returns. This structure avoids the double taxation typically imposed on C corporations, where both the company's profits and the dividends paid to shareholders are taxed.