C Corp. electing S Corp. Status

[Bird Legs]

C Corp., on a calendar year basis, elected to be taxed as a S Corp. effective with the
2006 year. Can this election be revoked before the end of the year, and revert back to
a C Corp.?
What happened was a client, single stockholder owner/employee of a C corp.
wanted to convert to a S Corp. Explained to her about the built in gain if disposed
of with in the ten yr period. Plus other things going along with an S Corp.
She said definitely she was not going to dispose of the business within the next
10 yrs. and that this is definitely what she wanted to do.
Okay, applied for the conversion.
Now she is in the process of selling the business and when I asked why, she replied
that there is no way she wanted to keep running the business for 10 yrs. She wants
out.
The corporation owns the building and land, which it continue to own after the sale.
Just the equipment and customer list etc. is being sold.
The corporation will find someone to lease the building & land.
Any ideas on this arrangement will be appreciated.
Thanks to all of you.

[sea-tax]

Got to love those clients? Yes I mean no , Uh I mean Yes.

Is she married and if so did her husband sign the 2553? I have used this once to disallow an election . I believe the directions say both must sign, I know this is definately true if you live in a community property state.

Basically and this sounds stupid but you rat on yourself , saying oops I didn't file the 2553 correctly so I must come clean and go back to c-corp.

I have also heard but never seen first hand that If you show that the corporate minutes never stated that they wanted S election or it was never agreed to by the board that the s-election can be taken back.

[Bird Legs]

sea-tax-additional info

No, she is not married. She inherited the stock from her husband who died about
4 years ago. She does have 2 daughters and neither one of them work in the
business.
She owns 100% of the stock.
And yes, Texas is a community property state.

[Bird Legs]

Additional info

Am about 99.98% certain that there is nothing in the minutes of a board meeting
regarding the S election.
My clients mother-in-law is on the board but does not own any stock.
Thanks, sea-tax, very much for responding.

[OldJack]

So what is your problem?

Well... I don't see a big problem from what you have stated. The sale of assets is probably going to be taxed much the same by being taxed at the S-corp level (4797 and build-in-gains tax) and again at the 1040 level (1120S-k1) with the cash proceeds available for tax-free distribution (1120S, page 3, property distributions).

Having the building and land in a S-corp has an advantage of the rental income not creating a personal holding company status (additional 15% tax) as might be with a C-corp. After 10 years the gain on the sale of the building and land would then be at 1040 capital gains rate rather than double regular tax from a C-corp. So what is your problem?