Which of the following statements is not true of an S-corporation?
A)It may have no more than 100 shareholders.
B)Shareholders must be U.S. citizens or residents.
C)Profits and losses must be allocated in proportion to shareholder interests.
D)Partnerships may be shareholders.
E)Shareholders may not deduct losses in an amount greater than their original investment.

Question

Quizplus · Accepted Answer

S-corporations cannot have partnerships as shareholders. The IRS allows individuals, certain trusts, and estates to be shareholders, but partnerships and corporations are excluded from being shareholders in an S-corporation.

Which of the Following Statements Is Not True of an S-Corporation