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Jason Is One of 100 Shareholders in Jace Corporation

question 98

Essay

Jason is one of 100 shareholders in Jace Corporation. The remaining 99 shareholders are unrelated individual U.S. residents. During the year, Jason gave several of his shares in Jace Corporation to his brother as a birthday present and to his best friend, Hal (unrelated to all shareholders in Jace Corporation), as a wedding present. After these gifts, Jace Corporation has 102 shareholders. Is Jace Corporation prohibited from electing to become an S corporation? Explain.


Definitions:

Capital Gains Yield

The percentage change in the market price of an asset over a period, excluding dividends.

Shares

Shares represent units of ownership interest in a corporation or financial asset, providing a proportionate claim on its assets and profits.

Geometric Return

The average rate of return per period on an investment, calculated by taking the nth root of the total compounded return, where n is the number of periods.

Investment

The method of apportioning capital with the expectation of financial returns or earnings.

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