If Joey marries a nonresident alien while living in North Carolina, what is the outcome for his S election?

When a shareholder of an S corporation marries a nonresident alien, the S election remains valid. This is because the nonresident alien spouse does not count as a U.S. citizen or resident for the purposes of S corporation ownership rules. An S corporation can only have qualifying shareholders, which include individuals who are U.S. citizens or residents.

In this case, since the nonresident alien is not a qualified shareholder, the presence of that spouse does not inherently cause the S election to terminate. The S corporation can continue to function and maintain its tax status as long as it adheres to the other rules governing S corporations, such as the limit on the number of shareholders and the restrictions on the types of shares issued.

This is an essential aspect of S corporation rules, as it helps to clarify that ownership restrictions primarily concern the qualification of shareholders, and marriage to a nonresident alien does not automatically affect the election status of the corporation. Therefore, the correct understanding is that the S election will continue to be in effect, allowing the corporation to enjoy the benefits associated with S status.