Question

ESS Corporation is organized on January 1, 20X1 and is a calendar year-end corporation. It meets all the S corporation requirements and all shareholders consent to an S corporation election. In order to be treated as an S corporation in the current year, ESS must make an election by

Answer 1

Answer:

ESS Corporation

S Corporation:

In order to be treated as an S corporation in the current year, ESS must make an election by March 15 (75 days from January 1, 20X1).

Explanation:

ESS Corporation becomes an S corporation when it has met the requirements to be treated as an S corporation.  With an S corporation structure, the corporate income or loss, deductions and credits of ESS corporation are passed through the individual shareholders for federal tax purposes.  This means that ESS Corporation does not pay federal income taxes, but the individual partners pay the taxes.  This avoids double taxation of the income of the ESS Corporation at the corporate and individual levels.  Instead, the tax is levied at the individual level and rates.  The company structure of ESS Corporation confers many advantages to her shareholders.