Golden Crowrie, Inc. has operated successfully as an S corporation for eight years in Greer, South Carolina.
Question:
Golden Crowrie, Inc. has operated successfully as an S corporation for eight years in Greer, South Carolina. In July 2010, the company has 100 shareholders. Morrie Shelby is considering obtaining a divorce and both Morrie and his wife Kristy own shares in the corporation.Morrie discusses the situation with the board of directors who offer several suggestions:
Morrie should postpone the divorce until 2011 while the company tries to purchase all of a shareholder who owns a small ownership interest.
Morrie and Kristy should remain married indefinitely for the good of the S election.
Two of the unmarried shareholders will be encouraged to marry for the “benefit” of the company.
The company will continue to list Morrie and Kristy as married on Form 1120S after they are divorced.
The S election saves the group about $320,000 each year.
How would you counsel Morrie to respond to the board’s proposals?
Accounting Principles Part 3
ISBN: 978-1118306802
6th Canadian edition Volume 1
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Kinnear, Joan E. Barlow