What is Qualified subchapter S subsidiary?
In short
An S corporation that owns 100% of another corporation can elect to treat it as a qualified subchapter S subsidiary. The subsidiary is then disregarded, and its assets, income and deductions are treated as the parent's.
Key takeaways
- The election is made on Form 8869.
- It lets a group use separate legal entities while filing one S corporation return.
- If the election ends, the subsidiary is treated as a new corporation acquiring the assets.
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?