Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Which of the following is prohibited from being an S corporation shareholder?

A U.S. citizen

A nonresident alien individual

An estate

A qualified trust

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Verified step by step guidance

Understand the concept of an S corporation: An S corporation is a type of corporation that meets specific Internal Revenue Service (IRS) requirements, allowing it to pass income, losses, deductions, and credits directly to shareholders for federal tax purposes.

Review the eligibility criteria for S corporation shareholders: According to IRS rules, shareholders must be individuals, certain trusts, or estates. Additionally, shareholders must be U.S. citizens or resident aliens; nonresident aliens are prohibited from being shareholders.

Analyze the options provided in the question: A U.S. citizen, an estate, and a qualified trust are all eligible to be S corporation shareholders under IRS rules. However, a nonresident alien individual is explicitly prohibited.

Confirm the reasoning: Nonresident aliens are excluded because S corporations are designed to ensure that income is taxed at the shareholder level within the U.S. tax system. Allowing nonresident aliens could complicate this taxation structure.

Conclude the answer: Based on the IRS rules, the correct answer is that a nonresident alien individual is prohibited from being an S corporation shareholder.