Snowshoe, Inc. ("Snowshoe"), a ski resort located in Colorado, was organized by its four individual shareholders CA, B, C and D) and began operations on October 3 of the current year. A owns 300 shares of Snowshoe voting common stock and B, C and D each own 100 shares of Snowshoe nonvoting common stock. Each share of common stock has equal I rights with respect to dividends and liquidation distributions. Consider the following questions in connection with the election and termination of Snowshoe's S corporation status:

(a) If the shareholders wish to elect S corporation status for Snow­shoe's first taxable year, who must consent to the election? What difference would it make if, prior to the election, B sold her stock to her brother, G? What difference would it make if B is a partnership which, prior to the election, sold its stock to H, an individual?

(b) What is the last day an effective Subchapter S election for Snowshoe's first taxable year is permitted?

(c) If the shareholders elect S corporation status, what taxable year will Snowshoe be allowed to select? In the following parts of the problem, assume that Snowshoe elected S corporation status during its first taxable year.

d) Can A revoke Snowshoe's Subchapter S election without the consent of B, C, or D?

(e) If C sold all of his stock to Olga, a citizen of Sweden living in Stockholm, what effect would the sale have on Snowshoe's status as an S corporation?

(f) Same as (e), above, except that C only sold five shares to Olga and had no idea that the sale might adversely affect Snowshoe's S corporation status.

(g) Would it matter if Snowshoe's business is diversified and 45% of its gross receipts come from real estate rentals, dividends and interest?

Answer rating: 100% (QA)

ANSWER AND EXPLANATION a All the shareholders ie A B C and D must consent to the election In case the stock is sold to G Bs brother then the consent of A C D and G will be needed B partnership isnt a ... View the full answer