How many voting and nonvoting shares are needed from shareholders to revoke an S election?

To revoke an S election, a corporation must obtain the consent of shareholders holding more than 50% of the overall shares, regardless of whether those shares are voting or nonvoting. This requirement is in place to ensure that a significant majority of the shareholders agree to the change in tax election. The the concept emphasizes the importance of majority ownership when making fundamental decisions about the corporate structure and tax classification.

Voting shares typically confer the ability to make decisions regarding company matters, while nonvoting shares do not grant this power. However, the threshold for revoking an S election looks at the total share ownership rather than just focusing solely on voting shares. This means that having a majority of overall shares—voting and nonvoting combined—validates the decision to revoke the S election.

The other choices do not accurately reflect this requirement. A reliance solely on voting shares would overlook the total ownership structure, while specific quantities, such as 10,000 shares, do not conform to the percentage-based criteria established by the IRS for tax status revocation. This highlights the importance of understanding ownership distribution when making strategic corporate decisions about tax elections.