3-1 Discussion: S Corporation Status Situation Discussion Topic
Starts Aug 24, 2019 11:59 PM
this discussion, you are faced with a situation involving a shareholder
threatening to take action that will result in a loss of S corporation
status. You must determine an appropriate response.
be taxed as an S corporation can have many benefits. However, a
corporation must continuously meet requirements to qualify for such
status. Failure to meet these requirements, at any time, can result in
the loss of S corporation status and costly consequences.
this discussion, first read the textbook assignment for this module.
Then, referring to your knowledge of tax regulation and the ethical
considerations associated with the situation, develop an appropriate
strategy for responding to the situation.
is the custodian at Quaker Inn, an S corporation that has paid him
bonuses over the years in the form of shares in the corporation. Burt
now holds 276 shares in Quaker Inn.
While listening to a
television debate about a national health care plan, Burt decides that
the company’s health coverage is unfair. He is concerned about this
because his wife, Dora, is seriously ill.
During the second week
of December, Burt informs Quaker’s president that he would like a
Christmas bonus of $75,000 cash, or else he will sell 10 shares of his
stock to one of his relatives, a nonresident alien. The resulting loss
of the S election would trigger about $135,000 in federal corporate
income taxes for the current year alone. How should Quaker Inn’s
management respond to Burt’s threat? From Burt’s point of view, do you
see any unintended consequences if he follows through on his threat?
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