### Question
How does the law define ineligible corporation?


### Answer
Under *26 U.S.C. § 1361*, **ineligible corporation** is defined as:

> any corporation which is—



(A) a financial institution which uses the reserve method of accounting for bad debts described in section 585,



(B) an insurance company subject to tax under subchapter L,



(C) a corporation to which an election under section 936 applies, or



(D) a DISC or former DISC

#### Citation:
  - *26 U.S.C. § 1361*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter S-Tax Treatment of S Corporations and Their Shareholders > PART I-IN GENERAL**

