Problem NO: 40

Knowshon, sole owner of Moreno Inc., is contemplating electing S status for the corporation (Moreno Inc. is currently taxed as a C corporation). Provi

Knowshon, sole owner of Moreno Inc., is contemplating electing S status for the corporation (Moreno Inc. is currently taxed as a C corporation). Provide recommendations related to Knowshon’s election under the following alternative scenarios:

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a. At the end of the current year, Moreno Inc. has a net operating loss of $800,000 carryover from 2023.  Beginning next year, the company expects to return to profitability.  Knowshon projects that Moreno will report profits of $400,000, $500,000, and $600,000 over the next three years.  What suggestions do you have regarding the timing of the S election?  Explain.

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