LLC-Scorp Termination

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  • OldJack
    Banned
    • Dec 2005
    • 1689

    #1

    LLC-Scorp Termination

    When a Single Member LLC elects S-corp status (f2553) and it is unintentionally terminated (and does not want S-corp status) what "tax entity" results? Does the LLC by default have C-corp status or 1040 Sch-C tax status after S-corp termination?
  • jainen
    Banned
    • Jul 2005
    • 2215

    #2
    Great question

    >>what "tax entity" results?<<

    Great question! I'm going to make my guess before any more careful person looks it up!

    I think the S-corp election includes an implied election to be taxed as a corporation, even if they take the shortcut and leave out a step or two. Therefore, terminating S-corp defaults to C-corp.

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    • Luis Mopeo
      Senior Member
      • Feb 2007
      • 231

      #3
      Not bad.

      Page 19-4 of TTB. "An eligible non-corporate entity that files Form 2553 is deemed to have made an election to be taxed as a corporation."

      I looked it up, but I doubt if that makes me more careful.

      Comment

      • OldJack
        Banned
        • Dec 2005
        • 1689

        #4
        Thanks guys for the reply. I agree even though we really don't have any authority to quote. At first I thought it might default back to the default of the LLC but after thinking about it that would result in automatic disposition of assets at fair-market-value. Not a good thing. So... making the form 2553 S-corp election is also making a C-corp election.

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