S Corporation Stockholder for Resident Alien

[jmc]

Mr. Doe is staying in U.S. under E-2 Visa and stockholder of an S Corporation. He received a letter from USCIS (INS) disallowing petition under the S Corporation, since he is not a permanent resident alien. However, IRC 7701(b)(1)A) says, “An alien individual shall be treated as a resident of the United States with respect to any calendar year if (and only if) such individual meets the requirements of clause (i) , (ii) , or (iii) :” And, clause (ii) is for Substantial presence test.
I think this means that he can be a stockholder of an S Corporation if he meets the Substantial presence test. Is there any misinterpretation of the IRC? Or is there any better source of reference for eligibility of S corp. Stockholder? I appreciate your time and effort regarding this matter.

[Bees Knees]

Regulation Section 1.1361-1(g)(1)(i) says a corporation having a shareholder who is a nonresident alien as defined in Section 7701(b)(1)(B) does not qualify as an S corporation. Section 7701(b)(1)(B) simply states that a nonresident alien is someone who does not meet the definition of a resident alien in Section 7701(b)(1)(A).

Section 7701(b)(1)(A) says an alien who meets the substantial presence test is treated as a resident alien.

So in other words, if your stockholder alien meets the substantial presence test, he or she is an eligible shareholder in an S corporation.

[jmc]

Exempt individuals & physical presence test

IRC 7701(b)(3)(D) says "An individual shall not be treated as being present in the United States on any day if
such individual is an Exempt Individual". Exempt Individual includes J, F, M, Q Visa status individuals, etc., but "E Visa" is not listed anywhere in the code sections. Then, does this mean that exempt individuals under those listed visas can not meet physical presence test and not be resident aliens,/ but exempt individuals under E Visa can meet physical presence test and be resident aliens?