In a recent case, Taproot Administrative Services, Inc. v. Comm’r., 109 A.F.T.R.2d 2012-1446 (9th Cir. 2012), the Ninth Circuit Court of Appeals affirmed the Tax Court’s decision that a Roth IRA is not an eligible shareholder of an S corporation. Under IRC § 1361, generally individuals, estates, certain exempt organizations and certain trusts (QSSTs and ESBTs) are eligible S corporation shareholders.  The Taproot case was decided before Treas. Reg. §1.1361-1(h)(1)(vii) was promulgated.  Treas. Reg. §1.1361-1(h)(1)(vii) now provides that individual retirement accounts (including Roth IRAs) are not eligible S corporation shareholders subject to certain exceptions.