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1, 1996. Prior to the 1996 Act, a former qualified subpart E trust was a permitted shareholder for a 60-day period beginning on the day of the deemed owner s death. However, if the entire corpus of the trust was includible in the gross estate of the deemed owner, the trust was a permitted shareholder for a 2-year period beginning on the day of the deemed owner s death. Under the regulations, special rules applied if the trust consisted of community property. A testamentary trust was a permit.

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Drawbacks of an ESBT: ESBT's income is taxed at the highest federal income tax rate, so overall tax may be higher than the individual tax for beneficiaries who are not already at the highest tax bracket.

Section 1.1361-1(m)(2)(iii) provides that the trustee of an ESBT must file the ESBT election within the time requirements prescribed in § 1.1361-1(j)(6)(iii) for filing a QSST election (generally within the 16-day-and-2-month period beginning on the day that the stock is transferred to the trust).

The main benefit of a QSST is that it is treated as a grantor trust and therefore considered an eligible S corporation shareholder.

The Difference Between the QSST and the ESBT Trust It is important to note the differences between the QSST and the ESBT, especially the difference in who must make the election. A QSST election must be made by the beneficiary, while an ESBT election must be made by the trustee.

ELECTING SMALL BUSINESS TRUSTS The main difference between an ESBT and a QSST is that an ESBT may have multiple income beneficiaries, and the trust does not have to distribute all income. Unlike with the QSST, the trustee, rather than the beneficiary, must make the election.

While there can only be one income beneficiary, a QSST may designate successor beneficiaries. With an ESBT, you can set up one trust that includes all of the income beneficiaries. However, note that any ESBT designated beneficiaries must be an individual, estate or charity eligible to own S corporation stock.

QSSTs are different than other other S corporation trusts in that the beneficiary is usually someone other than the grantor of their estate. Grantors/shareholders can use the QSST to make a gift of all or part of S corporation stock and retain voting power while the beneficiary receives the income.

2021 Electing Small Business Trust (ESBT) Tax Calculation Worksheet.

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© Copyright 1997-2025
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Form Packages
Adoption
Bankruptcy
Contractors
Divorce
Home Sales
Employment
Identity Theft
Incorporation
Landlord Tenant
Living Trust
Name Change
Personal Planning
Small Business
Wills & Estates
Packages A-Z
Form Categories
Affidavits
Bankruptcy
Bill of Sale
Corporate - LLC
Divorce
Employment
Identity Theft
Internet Technology
Landlord Tenant
Living Wills
Name Change
Power of Attorney
Real Estate
Small Estates
Wills
All Forms
Forms A-Z
Form Library
Customer Service
Terms of Service
DMCA Policy
About Us
Blog
Affiliates
Contact Us
Privacy Notice
Delete My Account
Site Map
All Forms
Search all Forms
Industries
Forms in Spanish
Localized Forms
Legal Guides
Real Estate Handbook
All Guides
Prepared for You
Notarize
Incorporation services
Our Customers
For Consumers
For Small Business
For Attorneys
Our Sites
US Legal Forms
USLegal
FormsPass
pdfFiller
signNow
airSlate workflows
DocHub
Instapage
Social Media
Call us now toll free:
1-877-389-0141
As seen in:
  • USA Today logo picture
  • CBC News logo picture
  • LA Times logo picture
  • The Washington Post logo picture
  • AP logo picture
  • Forbes logo picture
© Copyright 1997-2025
airSlate Legal Forms, Inc.
3720 Flowood Dr, Flowood, Mississippi 39232