A Qualified Subchapter S Trust, commonly referred to as a QSST Election, or a Q-Sub election, is a Qualified Subchapter S Subsidiary Election made on behalf of a trust that retains ownership as the shareholder of an S corporation, a corporation in the United States which votes to be taxed.
What is a qualified Subchapter S trust QSST )?
Abstract- Qualified Subchapter S trusts (QSSTs) can provide tax payers with substantial income tax and estate tax savings. QSSTs are different than other other S corporation trusts in that the beneficiary is usually someone other than the grantor of their estate.
Is a Qualified Subchapter S trust irrevocable?
Only estates and certain types of trusts can own shares of an S corporation. An irrevocable trust that is setup as a grantor trust, qualified subchapter S trust or as an electing small business trust may own shares of an S corporation.
What is a Subchapter S corporation and what are its requirements?
An S corporation, also known as an S subchapter, refers to a type of corporation that meets specific Internal Revenue Code requirements. If it does, it may pass income (along with other credits, deductions, and losses) directly to shareholders, without having to pay federal corporate taxes.
Can a qualified Subchapter’s Trust be a S corporation?
The Internal Revenue Code specifies broad categories of trusts that qualify as S shareholders. One of these, the qualified Subchapter S trust (QSST), is modeled after the grantor trust. It is eligible to hold stock in an S corporation, and, under the S corporation rules,…
Can a subtrust be treated as a separate trust?
For S shareholder eligibility purposes, substantially separate and independent shares of a single trust are treated as separate trusts under the QSST rules (Secs. 1361 (d) (3) and 663 (c); IRS Letter Ruling 200942020). Thus, separate and independent subtrusts can qualify for QSST status.
How much income is required to be distributed to a trust?
For example, if the S corporation allocated $20,000 of income to the trust and made a distribution of $15,000 to the trust, the trust would be required to distribute $15,000 to H. The $20,000 of passthrough income is not under the annual distribution requirement.
What happens when a trust ceases to be a QSST?
When this occurs, the trust would cease to be a QSST because it would have more than one current income beneficiary. This would lead to loss of S status for the corporation because a trust with two income beneficiaries is not an eligible shareholder.
