Question

Identify a disadvantage of being an S corporation.

a. Estates can be shareholders.
b. Losses flow through immediately to the shareholders.
c. Section 1202 treatment (qualified small business stock) is not available.
d. Tax-exempt income flows through as excludible to shareholders.
e. All of these are advantages of the S election.

Answer 1

The answer is C. section 1202 treatment (qualified small business stock) is not available

Step-by-step explanation:

An S corporation refers to a type of corporation that meets specific internal revenue code requirement.

S corporation is often more attractive to small-business owners than a standard (or C) corporation. That's because they have some appealing tax benefits and still provides business owners with the liability protection of a corporation.

Corporation taxes filed under S corporation may pass business income, losses, deductions, and credits to shareholders. S corporation shareholders must be individuals, specific trusts and estates, or certain tax-exempt organization.