### Question
How is the "affected shareholders" defined?


### Answer
The term **affected shareholders** is defined in *26 U.S.C. § 1377* as follows -

> the shareholder whose interest is terminated and all shareholders to whom such shareholder has transferred shares during the taxable year

#### Citation:
  - *26 U.S.C. § 1377*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter S-Tax Treatment of S Corporations and Their Shareholders > PART IV-DEFINITIONS; MISCELLANEOUS**

