Answer the following statements true (T) or false (F)

Question

1. S status can be elected if shareholders holding the majority of the stock consent to the S corporation election on the date of the S corporation election.
2. Voluntary revocation of an S corporation election is permitted only if consent is obtained from all shareholders.
3. Separately stated items are allocated to the S corporation shareholders based on the number of shares of stock owned on the last day of the S corporation's taxable year.
4. A shareholder's basis for the S corporation stock is adjusted for ordinary income or loss and separately stated items that flow through to the shareholders as well as for additional capital contributions by shareholders and distributions to shareholders.
5. A shareholder's deduction for ordinary losses and separately stated items cannot exceed his basis for the S corporation stock plus the debt basis for the shareholder loans made to the corporation and corporate-level liabilities personally guaranteed by the shareholder.

Answer 1

1. FALSE
All shareholders who own stock on the date the S election is filed must consent to the election.
2. FALSE
Consent is required from shareholders owning more than 50% of the stock.
3. FALSE
Separately stated items are allocated to the S corporation shareholders based on the number of shares of stock owned on each day of the S corporation's taxable year.
4. TRUE
This statement is a correct summary of the annual basis adjustment of S corporation stock.
5. FALSE
A shareholder does not receive debt basis for guaranteed corporate-level liabilities.