Kentucky Qualifying Subchapter-S Revocable Trust Agreement
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How to fill out Qualifying Subchapter-S Revocable Trust Agreement?
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FAQ
Specifically, S corporation shareholders must be individuals, specific trusts and estates, or certain tax-exempt organizations (501(c)(3)). Partnerships, corporations, and nonresident aliens cannot qualify as eligible shareholders.
As an initial matter, as long as the business owner is living, his or her revocable trust is treated as a grantor trust for income tax purposes, and as such, is an eligible S corporation shareholder.
For example, if a trust is a grantor trust to one individual, it is eligible as an S corporation shareholder, even though it is irrevocable (rather than revocable).
Designing a QSSTThe trust must have only one income beneficiary during the life of the current income beneficiary, and that beneficiary must be a U.S. citizen or resident;All of the income of the trust must be (or must be required to be) distributed currently to the one income beneficiary;More items...?
Testamentary trusts. This trust type is established by your will. It's an eligible S corporation shareholder 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.
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.
Since a revocable trust is not treated as separate from the grantor, it is an eligible S corporation shareholder while the grantor is alive.
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.
The benefit of a QSST from a tax perspective is that the income beneficiary is treated as the deemed owner over the portion of the trust that consists of stock in the S corporation. This means that the trust's allocable portion of the S corporation income is reported directly by the beneficiary.
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.