-In order for a corporation to make a valid “S” election, the corporation must be a “small business corporation.” Explain the meaning of “small business corporation” in this context.

-Explain what ‘separately stated items’ are in regards to Partnerships and S corporations? Give an example of ‘separately stated items’ for each type of entity.

-What requirements must be met in order for a corporation to make an effective S election?

-Why is ‘depreciation’ listed twice on Schedule M-1 of an S corporation tax return? (once on line 3 and once on line 6)

-In the S corporation context, what do the acronyms “AAA” and “OAA” stand for? Explain the purpose of both accounts.

-A client of yours is curious as to why a Form 1120-S has a section at the bottom of the first page where tax is calculated. The client understands that an S corporation is a pass-through entity, so the client asks you, “Why is there a tax calculation section at the bottom of the first page of the Form 1120-S?” Please respond to your client.

-You have a client who likes to do things on their own so that they don’t have to pay you a consulting fee. Nevertheless, one day your client says to you, “I am going to form a new business, and I’ve been doing some research on the Internet. I have learned that both S corporations and LLCs are pass-through entities for income tax purposes, and that an S corporation is treated just like an LLC. Therefore, the Internet says that it doesn’t really matter whether I form an S corporation or an LLC. What do you think?”

-In the Thor Power Tool case, the taxpayer kept its books according to GAAP. The Tax Court and other courts agreed that the taxpayer properly complied with GAAP. Why, then, did the taxpayer lose this case?

-Define a personal holding company? Why does Congress impose such a penalty tax on them?

-Under what circumstances would the accumulated earnings tax apply? Explain in detail.