Hawaiian Memories, Inc. (Hmi)

Issues:
A. Whether a C corporation that has preferred stock and common stock with both voting and nonvoting rights, eight shareholders among whom there are a Swedish individual and Plantation Sugar partnership, may elect to be an S corporation, under section 1361(b)(1)(B), 1361(b)(1)(C) and 1361(b)(1)(D)?
B. Whether all the shareholders must consent to the election of S status, under section 1362(a)(2)?
C. Whether the election of S status is effective if a C corporation does not meet all the requirements in the election year, under Reg §1.1362-6(2)(ii)(B)?
D. Whether an S corporation can keep its C corporation tax year, which ends in June 30, without documenting any business purpose, under the provision of section 1378(b)?
E. Whether a newly elected S corporation has to recapture LIFO amount in inventory, according to section 1363(d), to the extent of how much?
F. Whether a newly elected S corporation shall recognize the built-in gain from the sale of the appreciated land under section 1374(b)(2), to the extent of how much?
G. Whether an S corporation is allowed to use net operating losses incurred from previous C corporation years to offset the net recognized built-in gain for the succeeding S corporation years, in compliance with section 1371(b)(1)?
H. Whether the S corporation can deduct all the accident and health insurance, and defined contribution pension plan, under section  

Conclusion:
A. To become a valid S corporation, a C corporation must file the election and meet the requirements for small business corporation, which includes having one class of stock and not having foreign shareholder or partnership shareholder.
B. An elected S status is not effective unless all the shareholders consent to the election.
C. S status will be effective at the beginning of its taxable year if the corporation files the election in the prior year or within the 2 ½ months of the taxable year.
D. An S corporation must use a calendar year, unless it can... [continues]

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