Can a "S" corporation own "C" corporation common stock?

Corporations are artificial juridical persons, meaning they can sue or be sued. There is no restriction for a corporation to hold common stock of another corporation if it is permitted by its articles of incorporation. What do you mean by"S" and "C"? If you had just used A and B would not have mattered but using alphabets in quotes suggests there is something more to it. Can you please clarify?

It's a U.S. thing. An S Corporation is referring to subchapter S of the tax codes. It's a corporation that is treated like a partnership for tax purposes. There's certain conditions that must be met to be able to do this. Here's a wiki on it if you're interested:
S corporation - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/S_corporation)

A C corporation is a "regular" corporation, like the kind you normally think of, despite that the majority of corporations are S.

Johnnyboone, an S Corp is allowed to own C stock. The problem you may have heard about goes the other way: A C Corp cannot own any shares of an S Corp.

Keep in mind that if your S Corp was formerly a C, and still has C Corp E & P, your S Corp is limited in how much "passive" income it may earn, relative to its "active" income. So just make sure the dividends from the C shares don't unexpectedly trigger a "passive-income" problem for your S entity.

Also, under certain circumstances an S Corp can elect to treat a 100% owned C Corp as a so-called "Q Sub", meaning that the C Corp gets pass-through treatment for tax purposes. But that one can get a little tricky, so let your tax advisor walk you through it. I just toss it out there in case your situation might allow you to take advantage of it.

Good luck!

I have a C corporation who just purchased the stock on an existing S corporation in June of this year. Does the purchase of stock by a C corporation automatically terminate the S staus as of June? If so, does the original S corporation file a short year federal tax return or does the new C corporation pick up the full 12 months profit/loss since the c corporation puchased 100% of the stock?

I think rehmanvohra perhaps doesn't understand the different type of corporate entities available in the US (and I'm not expert, but I know a little something). S Corp or Subchapter S Corp has different rules and restrictions from a C Corp. The advantage of an S Corp is that it doesn't suffer from double taxation like C Corps. But S Corps have limits on the number of stock holders (50 I think) and the stockholders cannot be another Corp (so it can only be owned by a person). C Corps have double taxation, but they also have a lower tax rate, can income split, and can have lots of stock holders (I think over 500 stock holders it might have to go public, but I'm not sure).

I believe the simple answer (as others have pointed out) is that an S can own C stock, but a C cannot own S stock.