1. List five advantages and five disadvantages of making an S election. Explain each item.

2. Which of the following events cause an S election to terminate?

The S corporation earning 100 percent of its gross receipts in its first tax year from passive sources

The S corporation issuing nonvoting stock that has a dividend preference

The S corporation purchasing 100 percent of the single class of stock of a second domestic corporation that has conducted business activities for four years

An individual stockholder donating 100 shares of S corporation stock to a charity that is exempt from tax under Sec. 501(c)(3)

The S corporation earning tax-exempt interest income