Election effective for the following taxable year; ineligible shareholder. On Janu- ary 1, 1993, two individuals and a partnership own all of the stock of a calendar year sub- chapter C corporation. On January 31, 1993, the partnership dissolved and distributed its shares in the corporation to its five partners, all individuals. On February 28, 1993, the seven shareholders of the corporation con- sented to the corporation’s election of sub- chapter S status. The corporation files a properly completed Form 2533 on March 2, 1993. The corporation is not eligible to be a subchapter S corporation for the 1993 taxable year because during the period of the taxable year prior to the election it had an ineligible shareholder. However, under paragraph (a)(2)(ii)(B) of this section, the election is treated as made for the corporation’s 1994 taxable year.
