Question

Some stock in a calendar-year S corporation is sold to a nonresident alien on February 13, 2018. On what date is the corporation status as an S corporation terminated?

Answer 1

To get status of S Corporation the entity shall satisfy the following conditions:

1. There must be less than 100 shareholders

2. No Nonresident aliens

Once any of the conditions are violated the entity loses S Corporation status and becomes a C Corporation from the date of failure.

in the given case since nonresident alien became a member of entity on February 13, 2018 S corporation terminates as on February 12, 2018.

From February 13, 2018 entity is treated as C Corporation.