List five disadvantages of making an S election. (Select all that apply.)

A. An S corporation is subject to the personal holding company tax or the accumulated earnings tax if they elect to have a year-end that is not a calendar year end.

B. Allocation of ordinary income or loss and the separately stated items is based on the stock owned on each day of the tax year. Special allocations of particular items are not permitted, as they are in a partnership.

C. Dividends received by the S corporation are not eligible for the dividends-received deduction, as is the case for a C corporation.

D. A C corporation is treated as a separate tax entity from its shareholders, thereby permitting its first $50,000 of income to be taxed at a 15% marginal rate instead of the shareholder's marginal rate.

E. S corporations are subject to an excess net passive income tax and a built-in gains tax. Partnerships are not subject to either of these taxes.

F. The S corporation's earnings are taxed to the shareholders even though they are not distributed. This treatment may require the corporation to make distributions or salary payments so the shareholder can pay taxes owed on the S corporation's earnings.

G. The S corporation's earnings are taxed to the shareholders when they are distributed. This treatment means the S corporation might not distribute enough cash and then become subject to the accumulated earnings tax

H. An S corporation is not restricted in the number of shareholders it can have and the capital structure it can use, except at least one shareholder must be an individual. Partnerships and C corporations are not so restricted.

Please choose only five correct answers