Subchapter S Trust With Someone You Hurt
Description
How to fill out Qualifying Subchapter-S Revocable Trust Agreement?
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FAQ
When shareholders are allocated losses from an S Corporation they can use the losses to offset income from other sources ? if the losses pass three tests, the first two of which, ?stock basis? and ?at-risk? limitation rules, are the subject of this article. Both are based on how the loss was funded.
Generally, a trust cannot hold stock of an S corporation; however, grantor trusts, testamentary trusts, voting trusts, ESBTs, and qualified Subchapter S trusts (QSSTs) are permissible S corporation shareholders (Sec. 1361(c)(2)).
Charities that are described in Sec. 501(c)(3) and exempt from tax under Sec. 501(a) are permitted to own stock of an S corporation.
In the case of a simple non-grantor trust, the beneficiaries are responsible for paying the income taxes on the income generated by trust assets, while the trust will pay the taxes on capital gains.
A QSST is a trust with a single income beneficiary who makes an election (which can only be revoked with IRS consent) to be treated as the deemed owner (Sec. 1361(d)(3)).