fem 2553 Election by Small Business Corporation

Titemnal Revenue Sorvice (As to taxable status under subchapter S of the Internal Revenue Code)

NOTE—This election under section 1372(a) (with the consent of all your stockholders) to be treated as a “small business corporation” for income tax purposes may be
made only if the corporation is a domestic corporation which meets all five of the requirements stated in instruction A on the reverse.

Name of corporation | Employer identification number | Principal business activity (see instr. E)

Number and street Election is to be effective for the
beginning (Mo., day, year)

City or town, State and ZIP code Number of shares issued and outstanding

Is the corporation the outgrowth or continustion of any form of predecessor? [] Yes [J No. If “Yes,” state name of
predecessor, type of organization, and period during which it was in existence.

Annual return will be filed for
taxable year ending (Month)

“Date corporation first had assets ~ Date corporation

Date corporation first had sharehoiders

Stock a | -
. Social Security | Internal Revenue office where
Name and address (including ZIP code) of each shareholder an | Number individual return is filed

Date(s) acquired
No. of shares | “(see instr. D)

10..

I |
NOTE.—For this election to be valid, the consent of each stockholder must accompany this form or be shown below. See instruction D.

Under penalties of perjury, | declare that this election is duly authorized, and that the statements made are to the best of my knowledge and belief true, correct,
and complete statements.
Signature and ’

Title of Officer Date ..........-

, 19.

Shareholders’ statement of consent (May be used in lieu of attachments—see instruction D)

We the undersigned shareholders consent to the election of the above corporation to be treated as a small business corporation under
section 1372(a) of the Internal Revenue Code.

Signature of shareholders and date

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PURPOSE

The purpose of this election is to permit the undistributed taxable income of a

‘small business corporation” to be taxed to the

shareholders rather than the corporation. The term ‘‘undistributed taxable income’’ means taxable income (as computed under section
1373(d) of the Internal Revenue Code) minus the sum of (1) the tax imposed by section 1378(a) (relating to the tax on certain capital
gains) and (2) the amount of money distributed as dividends out of earnings and profits of the taxable year.

INSTRUCTIONS

A. Corporations eligible to elect—-The election may be made
only if the corporation is a domestic corporation which meets all
five of the following requirements:

(1) It has no more than 10 shareholders; however, if stock is
held by a husband and wife as joint tenants, tenants by the
entirety, or tenants in common, or is community property (or the
income from which is community income), it shall be treated as
owned by one shareholder.

(2) It has only individuals or estates as shareholders.

(3) It has no shareholder who is a nonresident alien.

(4) It has only one class of stock.

(5) It is not a member of an affiliated group of corporations
(as defined in section 1504 of the Code); however, a corporation
shall not be considered a member of an affiliated group during
any taxable year by reason of stock owned in another corporation
if such other corporation has not begun business before the close
of the taxable year and does not have taxable income for the
period included in such taxable year.

B. Valid election.—This election shall be valid only if all per-
sons who are shareholders of the corporation on the first day of
the corporation's taxable year or on the day of election, whichever
is later, consent to such election.

C. Time of making election—This form must be completed
and filed for any taxable year during (a) the first month of such
taxable year, or (b) the month preceding such first month. The
election shall be effective for the taxable year for which it is made
and for all succeeding taxable years unless it is terminated under
section 1372(e).

D. Shareholders’ statement of consent.—(1) At the option of
shareholders on the date of the election, their signatures may be
entered on the consent shown in the lower portion of the election
form (2553) filed by the corporation, in place of preparing and
attaching the consents described in (2) below. See (2) for instruc-
tions regarding who must sign. Spaces on Form 2553 relating to
dates the shareholders’ stock was acquired need be filled in only
for those shareholders using the consent shown on the face.

(2) In general—The consent to the election of the corpora-
tion by all shareholders at the date of election (which may be
incorporated in one statement) shall be attached to this form
unless otherwise shown on the face. In addition to an affirmative
statement that the shareholder consents to the corporate election,
the attached statement shall set forth the name and address of
the corporation and of the shareholder, the number of shares of
stock owned by the shareholder, and the date(s) on which such
stock was acquired. The consent must be signed by both the
husband and wife if they have a community interest in the stock
or the income therefrom, and by each tenant in common, each
joint tenant, and each tenant by the entirety. The consent of a
minor shall be made by the minor or by his legal guardian, or his
natural guardian if no legal guardian has been appointed (even
in the case of stock held by a custodian for a minor under a statute
patterned after the Uniform Gifts to Minors Act). The consent of
an estate shall be made by the executor or administrator thereof.
If the election is made before the first day of the corporation’s
taxable year, the consent of persons who became shareholders
after the date of the election and on or before such first day shall
be filed with the Internal Revenue office where this election was
filed as soon as practicable after such first day but in no event
later than the last day prescribed for filing the election, and a copy
shall also be filed with Form 1120S.

(3) New shareholders.—lf a person becomes a shareholder
after the first day of the taxable year for which the election is
effective, or after the day on which the election is made (if such

day is later than the first day of the taxable year), the consent of
such shareholder shall be made in a statement filed (with the
Internal Revenue office where the election was filed) within the
period of 30 days beginning with the day on which such person
becomes a new shareholder, and a copy shall also be filed with
Form 1120S. If the new shareholder is an estate, the 30-day
period shall not begin until the executor or administrator has
qualified under local law to perform his duties, but in no event
shall such period begin later than 30 days following the close of
the corporation's taxable year in which the estate became a share-
holder. In addition to an affirmative statement that the shareholder
consents to the corporate election, the statement of consent shall
set forth the name and address of the corporation and of such new
shareholder, the number of shares of stock owned by such share-
holder, the date on which such shares were acquired, and the
name and address of each person from whom such shares were
acquired, NOTE.—Failure of a new shareholder to consent to the
election within this required period terminates the election, and
the corporation must so notify the Internal Revenue office where
this form was filed.

(4) Extension of time.—If an election would be valid except
for the failure of a shareholder to file a timely consent, application
for an extension of time to file a shareholder's consent may be
made to the Internal Revenue office where this election was filed.
See Section 1.1372~3(c), Income Tax Regulations, for the re-
quirements and procedures to be followed in applying for such an
extension.

E. Principal business activity—In reporting the principal
business activity give the one business activity that accounts for
the largest percentage of ‘‘total receipts.” ‘‘Total receipts’’ means
gross sales and/or gross receipts, plus all other income. State
the broad field of business activity as well as the specific product
or service, such as “Mining copper,’’ ‘Manufacturing cotton
broad woven fabric,” ‘Wholesale food,”’ or ‘‘Retail apparel.”

F. Where to file——This election is to be filed with the Internal
Revenue office where the corporation will file Form 1120S, U.S.
Small Business Corporation Income Tax Return. See instructions
for Form 1120S.

G. Signature.—This form must be signed either by the presi-
dent, vice president, treasurer, assistant treasurer, chief account-
ing officer, or other corporate officer (such as tax officer) who is
authorized to sign.

H. Election after termination.—lf a corporate election has
been terminated under section 1372(e), see section 1372(f) of
the Code and Section 1.1372-5, Income Tax Regulations, for the
restrictions on eligibility to make a new election.

I. Annual return.—The corporation must file Form 1120S
annually and attach thereto a copy of each shareholder's consent
which was filed subsequently to this Form 2553.

J. Investment credit property—Section 47 of the Internal
Revenue Code and the regulations thereunder provide that section
38 property (relating to the qualified investment in certain depre-
ciable property which was the basis for a credit against tax) ceases
to be section 38 property when a corporation makes a valid
election under section 1372 to be an electing small business
corporation, and the tax recomputation provisions of section 47
will apply.

Such corporations and their shareholders may, however,
execute the agreement specified in Section 1.47—4(b)(2) of the
regulations so that the recapture provisions of Section 1.47—1(a)
will not apply to such section 38 property. Refer to section 47 cf
the Internal Revenue Code and the regulations thereunder.

Form (Rev. 10-68)2553