S Corporation Eligibility And Compliance Rules Practice Test

Pinecrest Medical Supply, Inc. is a newly formed corporation that wants S Corporation status effective for its first tax year beginning January 1. The organizers obtained signatures from all shareholders but are unsure which filing controls the S election. Which factor affects the S Corporation election process?

Canyon Ridge Foods, Inc. is an S Corporation. It is considering issuing convertible debt that can be converted into shares with preferential distribution rights upon conversion. Management wants to ensure the financing does not create a second class of stock. What action should be taken to comply with S Corporation rules?