A, B and C, all individuals, own 30%, 30% and 40%, respectively, of X Corp. A, B and C are all U.S. citizens. X is a Delaware corporation. X elects to file S Corp. status on February 1, 2020 and states that the election is effective January 1, 2020. 

(a) A, B and C consent to this election. Is this election valid? 

(b) Suppose instead that only A and B consent to the election. Would this change your answer? 

(c) Same as (a) except that C's shares are voting preferred. Would this change your answer? 

(d) Assume the same facts as (a). In addition, assume that in 2020 X has income of 36,500. On February 1, 2020, A sells his shares to N, a nonresident alien. What consequences from these additional facts? 

(e) Same as (d) except that A sells his shares to P Corp. Would this change your answer? 

(f) Same as (e) except that P Corp. acquires A's shares because A defaulted on a loan from P. Two weeks later, the default is cured and the shares are returned to A. Would this change your answer? 

(g) Assume the same facts as (a). Assume further that on February 15, 2020, C elects to terminate the S status. A and B do not consent to the termination. What result? 

(h) Same as (g) except that A and B do consent to the termination of S status but C does not consent

Answer rating: 100% (QA)

a The election is valid b The election would not be valid c The election would be valid d The electi... View the full answer