Revoking S Corp election

[Naila]

My client has S Corporation. He wants to revoke S Corp election. The S Corp has around $45,000.00 negative retained earning in balance sheet. He already took benefit of this loss through K-1 during previous years. If the corporation is converted into C corp, what will be the treatment of these previous losses.

[OldJack]

Nothing... the sub S account becomes frozen on the Corp books (still shown as AAA account) and a new account is established for the C-Corp.  Remember if S status is terminated on any date other than the first day of the year you must file 2 tax returns one as 1120S and the other as1120.  You can file your revoke and elect to make it effective on the first day of the year.