Which of the following statements is not true of S corporations?
A. S corporations are corporations that receive tax treatment similar to that given partnerships.
B. Section 1231 gains and losses pass through separately to stockholders of an S corporation.
C. The amount of S corporation losses that a shareholder of an S corporation may report on his or her tax return is limited to the basis of the stock plus any loans made by the shareholder to the corporation.
D. If a taxpayer purchases stock in an S corporation from another shareholder during the year, the new shareholder may report the entire amount of any loss for the year attributable to the shares purchased.
E. If an otherwise qualifying shareholder acquires 40 percent of the stock of an S corporation, the new shareholder cannot cause the corporation to lose its S corporation election.
Answer: D
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