Question

Which statement is incorrect with respect to the number-of-shareholders test in filing an s election?

a. husband jaime and ex-wife isabel count as one shareholder.
b. grandmother adela and granddaughter maria count as one shareholder.
c. husband jaime and wife maria count as one shareholder.
d. all of these statements are correct.

Answer 1

The number-of-shareholders test in filing an S election determines whether a corporation is eligible to be treated as an S corporation for tax purposes. Option (D) is correct.

Step-by-step explanation:

The number-of-shareholders test in filing an S election determines whether a corporation is eligible to be treated as an S corporation for tax purposes. In order to qualify, an S corporation must have no more than 100 shareholders who are individuals, estates, certain types of trusts, or specific exempt organizations. Therefore, option a. stating that husband Jaime and ex-wife Isabel count as one shareholder is incorrect, as they would be considered as two separate shareholders.

S corporations do not pay any income taxes. Instead, the corporation's income and losses are divided among and passed through to its shareholders. The shareholders must then report the income or loss on their own individual income tax returns.

A business organisation having a separate legal entity, i.e. an identity distinct from its owners, is called a corporation or a company in India. Any corporation can sue or be sued in its own name.