Does a grantor trust need to make a QSST election?
A grantor trust is a permitted shareholder of an S corporation during the life of the deemed owner of the trust. After this two- year period, the trust will need to make a QSST or ESBT election to prevent the termination of the corporation’s S election.
Is a QSST a grantor type 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 interest terminates when the trust terminates or the beneficiary dies, and at that point principal and income must be distributed to the beneficiary (or the beneficiary’s estate).
What is the purpose of an ESBT?
The ESBT is treated as a single trust for administrative purposes, such as having one taxpayer identification number and filing one tax return.
When does a trust have to be a QSST?
Where a corporation whose stock the trust holds makes an S election, the trustee must make the ESBT election within the two-month-and-16-day period beginning on the day the S election is effective. The decision to elect to be a QSST or ESBT may hinge on the structure of each particular trust.
When to treat a QSST as a permitted shareholder?
This paragraph (j)(6) applies to the election provided in section 1361(d)(2) (the QSST election) to treat a QSST (as defined in paragraph (j)(1) of this section) as a trust described in section 1361(c)(2)(A)(i), and thus a permitted shareholder. This election must be made separately with respect to each corporation whose stock is held by the trust.
Can a spouse be listed as a QSST beneficiary?
Also, spouses may both be listed as income beneficiaries of a QSST and they will be treated as a single beneficiary if they file a joint income tax return. The trust’s current income beneficiary must make the QSST election.
Who is required to file a QSST statement?
The trust’s current income beneficiary must make the QSST election. The beneficiary must file a statement that complies with Sec. 1361 (d) (2) and in the manner prescribed by Regs. Sec. 1.1361-1 (j) (6) and Rev. Proc. 2013-30.
