Arizona Irrevocable Trust which is a Qualifying Subchapter-S Trust
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How to fill out Irrevocable Trust Which Is A Qualifying Subchapter-S Trust?
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FAQ
An irrevocable grantor trust can own S corporation stock if it meets IRS regulations. The trust must contain language stating that all the ordinary income the trust earns along with the original trust assets are owned by the trust grantor.
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.
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.
An irrevocable trust cannot be changed or modified without the beneficiary's permission. Essentially, an irrevocable trust removes certain assets from a grantor's taxable estate, and these incidents of ownership are transferred to a trust.
Three commonly used types of ongoing trusts qualify as S corporation shareholders: grantor trusts, qualified subchapter S trusts (QSSTs) and electing small business trusts (ESBTs).
An irrevocable trust is simply a kind of trust that cannot be changed or canceled after the document has been signed. This sets it apart from a revocable trust, which can be altered or terminated and only becomes irrevocable when the trust maker, or grantor, dies.
Testamentary trusts. These trusts, which are established by your will, are eligible S corporation shareholders for up to two years after the transfer and then must either distribute the stock to an eligible shareholder or qualify as a QSST or ESBT.
Irrevocable trusts are often set up as grantor trusts, which simply means that they are not recognized for income tax purposes (all of the income tax attributes of the trust, such as income, loss, gains, etc. is passed on to the grantor of the trust).
Since a revocable trust is not treated as separate from the grantor, it is an eligible S corporation shareholder while the grantor is alive.
TRUSTS COMMONLY USED TO HOLD S CORPORATION STOCK Three commonly used types of ongoing trusts qualify as S corporation shareholders: grantor trusts, qualified subchapter S trusts (QSSTs) and electing small business trusts (ESBTs).