EA Exam Part 2 / Businesses
S Corporation Shareholder Limit 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.
What is the maximum number of shareholders a corporation may have to be eligible to elect S corporation treatment?
- A
25
- B
50
- C
75
- D
100
Correct answer
100
An otherwise eligible small business corporation may have no more than 100 shareholders.
Reference testedIRC 1361(b)(1)(A); Instructions for Form 2553
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.