Question

Lobster Pot Corp, a domestic corporation, made a valid Subchapter S election several years ago. For A through D:

1. Answer “Yes” if Lobster Pot’s S-corp status will terminate because of the circumstance given.

2. Answer “No” if the circumstance will not terminate Lobster Pot’s S status.

A. The number of Lobster shareholders has grown to 101. All of the shareholders are unrelated except that two of them are husband and wife.

B. The number of Lobster shareholders had grown to 101. All of the shareholders unrelated, except for Arnold and Brenda, who are parent and child.

C. One of Lobster’s shareholders is Igor, a U.S. citizen living in Idaho. While on vacation in Sweden, Igor met a Swedish citizen named Olga. Olga convinced Igor to move to Sweden to be near her. Igor did so and now lives full time in Sweden.

D. One of Lobster’s shareholders is Igor, a U.S. citizen living in Idaho. While on vacation in Sweden, Igor met a Swedish citizen named Olga. Olga convinced Igor to move to Sweden to be near her. Igor did so and now lives full time in Sweden. In addition, Olga convinced Igor to give her some of his shares in Lobster.

Answer 1

S corporations are regular corporations that have made a special election to be treated as a pass through entity.

A. Answer is "No". In a S corporation, there can't be more than 100 shareholders but family members are counted as one shareholder, which include spouse.

B. Answer is "No". In a S corporation, there can't be more than 100 shareholders but family members are counted as one shareholder, which include children.

C. Answer is "No". In a S corporation, only US citizens and US residents are eligible to own shares. Igor now lives full time in Sweden but he is a US citizen.

D. Answer is "Yes". In a S corporation, only US citizens and US residents are eligible to own shares. Olga is neither a US citizen nor a US resident.