Corporation S Election Cancellation

[mircpa]

Hi everyone

Have a client who has a S corporation, new individuals are buying common stock/shares of this corporation, my question, does S election stands cancelled from Jan 1 2008 or from date of stock sale transaction, (eg today's date), new shareholders does not want S election, or does corporation files 1120S from Jan 1 until today's date and 1120 for remainder of year ?

[jainen]

>>new shareholders does not want S election<<

The corporation can file a formal revocation with statements from consenting shareholders, effective next January 1. Or they can trigger automatic disqualification, such as by transferring stock to an ineligible shareholder. It seems kind of late to be asking this question.

[mircpa]

thanks jainen

[PapaJoe]

"...does S election stands cancelled from Jan 1 2008 or from date of stock sale transaction, (eg today's date)"

If today's date is date of stock sale, then it's not 'kinda late' to be asking.

[mircpa]

Have seen cases where previous owners file 1120S until the time sale transaction took from Jan 1 AND new owners file 1120 from sale transaction, i.e. today's date until Dec 31

[jainen]

>>Have seen cases where previous owners file 1120S until the time sale transaction took from Jan 1 AND new owners file 1120 from sale transaction<<

Are you saying that is the correct way? Or that it is okay to do it because somebody else did it first? Or something else?

[mircpa]

>>Have seen cases where previous owners file 1120S until the time sale transaction took from Jan 1 AND new owners file 1120 from sale transaction<<

Are you saying that is the correct way? Or that it is okay to do it because somebody else did it first? Or something else?

All i am trying to do is get a strategy, dont you think stock transfer to ineligible shareholders automatically triggers disqualification, if that is the case since when the corporation losses S status from Jan 1st 2008 or today's date or jan 1st 2009 ?

[jainen]

>>stock transfer to ineligible shareholders automatically triggers disqualification<<

Yes, you have two short years as of the date of transfer. But it needs to be to a bona fide stockholder, not an agent or nominee of the true owners just trying to get around the timing requirements.

[mircpa]

This is what i am trying to find out to narrow out my thinking, of course it is a bonafide transaction/stockholder. thanks again