McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 63

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 vote (2 to 1) to terminate the election.