Cussler Corporation, a calendar year taxpayer, has been an S corporation for several years. On July 5, 2009, Cussler authorizes a second class of nonvoting preferred stock that pays an 8% annual dividend. The corporation issues the stock to Sid on September 8, 2009, to raise additional equity capital. Sid owns no other Cussler stock.
a.Does Cussler's S election terminate? If so, when is the termination effective?
b.What tax returns must Cussler file for 2009? When are they due?
c.How would your answer to Parts a and b change if instead the second class of stock were nonvoting Class B common stock?