S-Corp Simplification

The new legislation contains many simplification and modernization reforms, including but not limited to treating shareholders within six generations of one another as one shareholder; increasing the allowable number of shareholders in an S-corporation to 100 (from 75); and providing IRS with authority to grant relief for an inadvertent S-corporation election/termination that could result in the company losing S-corporation status.

The law makes it easier for existing C-corporations to convert to S-corporations and for new businesses to elect S-corporation status. These three provisions are effective for taxable years beginning after December 31, 2004.

American Jobs Creation Act of 2004 H. Rept. No. 108-755

Quoted From – National Association of Enrolled Agents Newsletter October 29, 2004