PUBLIC LAW 94-455—OCT. 4, 1976
9 0 STAT. 1609
date), in the same proportion as held by the spouses before such death, or " (4) was, on the date of the death of a surviving spouse, stock described i n paragraph (3), and is, by reason of such death, held by the estates of both spouses in the same proportion as held by the spouses before their deaths, shall be treated as owned by one shareholder." (2) BROADENING CLASSES INCLUDE CERTAIN TRUSTS.
or
PERMISSIBLE
SHAREHOLDERS TO
(A) Section 1371 (relating to definitions for purposes of 26 USC 1371. subchapter S) is amended b}^ a d d i n g at the end thereof the following new subsection: "(f)
CERTAIN TRLTSTS PERMITTED AS SHAREHOLDERS.—For purposes
of subsection (a), the following trusts may be shareholders: " (1) A trust all of which is treated as owned by the grantor <: under subpart E of part I of subchapter J of this chapter. 26 USC 671. " (2) A trust created primarily to exercise the voting power of stock transferred to it. " (3) Any trust with respect to stock transferred to i t pursuant to the terms of a will, but only for the 60-day period beginning on the day on which such stock is transferred to it. I n the case of a trust described in paragraph (2), each beneficiary of the trust shall, for purposes of subsection (a)(1), be treated as a shareholder.". (B) Paragraph (2) of section 1371(a) is amended by striking out " ( other than an e s t a t e) " and inserting in lieu thereof " ( other than a n estate and other than a trust described in subsection (f)) ". (3) N E W SHAREHOLDERS MUST ArriRMATivELy ELECT TO TERMI-
NATE ELECTION.—Paragraph (1) of section 1372(e) (relating to 26 USC 1372. termination of election) is amended to read as follows: " (1) N E W SHAREHOLDERS.—
" (A) A n election under subsection (a) made by a small business corporation shall terminate if any person who was not a shareholder in such corporation— " (i) on the first d a y of the first taxable year of the corporation for which the election is effective, if such election is made on or before such first day, or " ( i i) on the day on which the election is made, if such election is made after such first day, becomes a shareholder in such corporation and affirmatively refuses (in such manner as the Secretary shall by regulations prescribe) to consent to such election on or before the 60th day after the day on which he acquires the stock. " (B) I f the person acquiring the stock is the estate of a decedent, the period under subparagraph (A) for affirmatively refusing to consent to the election shall expire on the 60th day after whichever of the following is the earlier: " (i) The day on which the executor or administrator of the estate qualifies; or " ( i i) The last day of the taxable year of the corporation in which the decedent died. " (C) Any termination of a n election under subparagraph (A) by reason of the affirmative refusal of any person to consent to such election shall be effective for the taxable year of the corporation in which such person becomes a shareholder
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