C Corp to S Corp W/ Retained Earnings

[Bird Legs]

C Corp. elected to be an S Corp. At the date of election, FY beginning 10/01/05 the C Corp had retained earnings of approx. $900. A Short year 1120S filed for the period 10/1/05 thru 12/31/05.
Question: can this $900. now be paid out to stockholder as dividends? If so,
what advantage is that to the corp.?
Of course, if they are paid out then a 2006 form 1099-DIV will be issued at the
appropriate time.
Your help with this is greatly appreciated.

[veritas]

You can elect to distribute the ccorp earnings out of distributions any year you wish. The advantage would be in years where the corporation ceases to have active operations. You may have a situation where income would be taxed at the maximum corporate rates even though it is now a scorp.