Congress has substantially limited the use of Subchapter S corporations. To qualify as the requisite "small business corporation," the entity must be a domestic corporation which is not a member of an affiliated group. Except in limited circumstances, the corporation cannot have more than ten stockholders, and in no case may it have more than one class of stock. Only individuals, estates, and certain trusts, none of which can be a nonresident alien, may own stock in the electing corporation. The purpose of this Note is to examine the statutory restriction of the number of stockholders and the methods by which it can be satisfied. Consideration is given to techniques to "shrink" the number of stockholders, with particular emphasis on the effect of Revenue Ruling 77-220.
Gary M. Gotsdiner,
Subchapter S: The Use of Multiple Corporations to Satisfy Section 1371(a)(1): Revenue Ruling 77-220, 1977-1 C.B. 263,
57 Neb. L. Rev. 1113
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