S Corporation Shareholder Eligibility Practice Question
Work the complete fact pattern before revealing the explanation. This question is adapted from the IRS public sample set for the current exam law period.
Which statement is correct regarding a corporation electing S corporation status?
- A
A corporation can have no more than 75 shareholders
- B
Voting and non-voting stock automatically prevents the election
- C
A nonresident alien shareholder prevents the election
Correct answer - D
Spouses always count as two separate shareholders for the limit
A nonresident alien shareholder prevents the election
A nonresident alien cannot be an eligible S corporation shareholder.
Transfer the reasoning, not the wording.
Restate the tested rule without the answer choices. Then change one decisive fact and explain which option would need to change. That short exercise makes the explanation retrievable instead of merely familiar.
Official sample source
PassFast adapted this public IRS sample for web practice and added the concise explanation above.