Hughie, Dewey, and Louie are equal shareholders in HDL, an S corporation. HDL's S election terminates under each of the following alternative scenarios. When is the earliest it can again operate as an S corporation?
a. The S election terminates on August 1, year 2, because Louie sells half his shares to his uncle Walt, a citizen and resident of Scotland.
b. The S election terminates effective January 1, year 3, because on August 1, year 2, Hughie and Dewey voted (2 to 1) to terminate the election.