Tax Research

Part 1 a. 资料

S Corporations Trusts

POSTED IN ESTATE PLANNING BY LAWYERS.COMSM 

A "trust" is a legal entity or creature that is created when the person making the trust (the "settlor" or "grantor"), transfers ownership of certain property or assets to a "trustee." The trustee, in turn, is responsible for using the property or investing it for the benefit of a third party (the "beneficiary"), who was specified by the settlor when he or she made the trust.

Special rules apply if the trust will hold stock or shares in a corporation, and particularly if the corporation is an "S Corporation." Only certain trusts can be shareholders of an S corporation:

* Grantor trusts

* Qualified subchapter S trusts (QSST), and

* Electing small business trusts (ESBT)

There are several requirements that must be met in order for any of these trusts to be valid. There can be serious consequences to both the corporation and to all of its shareholders if the trust is invalid and S-Corporation stock is transferred to it. So, if you're considering a such a trust, be certain to read the federal tax laws carefully, or seek the advice of an experienced tax attorney or estate planning attorney.

What is an S-Corporation?

An "S Corporation" is a corporation that qualifies for and has made the special federal tax electionunder Subchapter S of the federal tax code) to bypass the tax at the corporate level and be taxed only at the shareholder level. In effect, a qualifying S corporation pays no tax on its income. Instead, the shareholders pay the tax on the corporate taxable income in proportion to a percentage of shares they own in the corporation. For example, a person who owns 15% of an S-Corporation's stock, then he or she will pay a tax on 15% of the corporation's taxable income.

Because of this special tax treatment, there are significant restrictions on who can own an interest in an S Corporation, and there is a limitation on the number of shareholders that it can have....