Question

Jettison Corporation, an S corporation, may have its S corporation election terminated by all of the following except:

a. X, an individual shareholder of Jettison, contributes 6 of his 10 shares in Jettison to G corporation.

b. No less than unanimous consent of all of Jettison’s shareholders.

c. The number of Jettison shareholders exceeds 100 shareholders

d. Jean, a citizen and resident of France, acquires 5% of Jettison shares

Answer 1

Answer:- b. No less than unanimous consent of all of Jettison’s shareholders.

Reason:- An S corporation has following limitations:

• It cannot have more than 100 share holders (Thus point c. will terminate S corporation)
• Foreign ownership is prohibited in S corporation (Thus point d. will terminate S corporation)
• S corporation shareholders can only be individuals, estates and certain types of tax-exempt entities and trusts (Thus point a. will terminate S corporation)