Corporation X has one class of stock with varying voting rights. Which of the following statements is most accurate regarding Corporation X's eligibility for S corporation status?
Understand the Problem
The question asks about the eligibility of a corporation with varying voting rights within a single class of stock to be classified as an S corporation. It requires knowledge of S corporation requirements regarding stock structure and voting rights.
Answer
Corporation X is eligible for S corporation status.
Corporation X is still eligible for S corporation status because S corporations are allowed to have one class of stock with varying voting rights.
Answer for screen readers
Corporation X is still eligible for S corporation status because S corporations are allowed to have one class of stock with varying voting rights.
More Information
An S corporation can have only one class of stock, but differences in voting rights are permitted.
Tips
It's easy to confuse the 'one class of stock' rule with restrictions on voting rights. Remember that differing voting rights within a single class of stock doesn't automatically disqualify a corporation from S status.
Sources
- S Corp vs C Corp - Differences & Benefits | Wolters Kluwer - wolterskluwer.com
- S corporations | Internal Revenue Service - irs.gov
- Instructions for Form 2553 (12/2020) | Internal Revenue Service - irs.gov
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