Bristol Corp. was formed as a C corporation on January 1, 1985, and elected S corporation status on January 1, 1991. At the time of the election, Bristol had accumulated C corporation earnings and profits that have not been distributed. Bristol has had the same 25 shareholders throughout its existence. In 2019, Bristol's S election will terminate if it
A. Increases the number of shareholders to 50.
B. Adds a decedent's estate as a shareholder to the existing shareholders.
C. Takes a charitable contribution deduction.
D. Has passive investment income exceeding 90% of gross receipts in each of the 3 consecutive years ending December 31, 2019.
Answer: D. Has passive investment income exceeding 90% of gross receipts in each of the 3 consecutive years ending December 31, 2019.