In short
Besides grantor trusts, two kinds of trusts can hold S corporation stock: a qualified subchapter S trust (QSST) and an electing small business trust (ESBT).
Key takeaways
- A QSST has one income beneficiary, must distribute all its income, and the beneficiary is taxed on the S corporation income.
- An ESBT can have several beneficiaries and accumulate income, but pays tax on the S corporation income at the highest individual rate.
- Each requires an election, and missing it can end the S election.
Where it's tested
TCP: S Corporation Compliance & Planning — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
An S corporation shareholder wants to deduct a $50,000 loss but has only $20,000 of stock basis. Which action would create additional basis to absorb the loss?