Hughie, Dewey, and Louie are equal shareholders in HDL, an S corporation. HDLs S election terminates under each of the following alternative scenarios. When is the earliest it can again operate as an S corporation? a) The S election terminates on August 1, year 2, because Louie sells half his shares to his uncle Walt, a citizen and resident of Scotland. b) The S election terminates effective January 1, year 3, because on August 1, year 2, Hughie and Dewey vote (2 to 1) to terminate the election.
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