H Company, an S corporation owned by A, B, and C, voluntarily terminated its S election and became a C corporation.One year later, A sold his one-third interest in the corporation to D.B, C, and D may re-elect S corporation status at this time, without permission from the IRS, since there has been a partial change in ownership.

Question

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The IRS requires a waiting period of 5 years after terminating S corporation status before the corporation can re-elect S status, unless the IRS consents to an earlier election. Ownership changes do not affect this requirement.

H Company, an S Corporation Owned by A, B, and C