### Question
How does the law define 2-percent shareholder?


### Answer
Under *26 U.S.C. § 1372*, **2-percent shareholder** is defined as:

> any person who owns (or is considered as owning within the meaning of section 318) on any day during the taxable year of the S corporation more than 2 percent of the outstanding stock of such corporation or stock possessing more than 2 percent of the total combined voting power of all stock of such corporation

#### Citation:
  - *26 U.S.C. § 1372*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter S-Tax Treatment of S Corporations and Their Shareholders > PART III-SPECIAL RULES**

