tax search Essay

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. If stock in an S corporation is transferred to a person who is ineligible to be a shareholder in an S Corporation or a transfer results in the number of shareholders exceeding the maximum, then the S corporation's election will be terminated. Also, the corporation and its shareholders will likely incur substantial tax liabilities as a result of the loss of the Subchapter S status.
Grantor Trusts
A grantor's trust is one where the grantor keeps some interest in either the trust assets or the income that is generated by the trust. In a grantor's trust, the grantor is treated as the owner of the trust for federal income tax purposes, and so there is no tax at the trust level: all income and losses are passed through to the grantor.
Any trust that qualifies as a grantor trust will be eligible to hold S Corporation stock. It does not matter what the terms of the trust are and there is no need for the grantor (or anyone else, that is, the trustee or the beneficiary) to make an election to be a shareholder of the S-Corporation, as long as the grantor is a U.S. citizen or resident.
Qualified Subchapter S Trust (QSST)
A valid QSST must meet certain requirements, and the beneficiary of the trust must join in making the S Corporation election for tax purposes. To qualify, a QSST:
Can have only one income beneficiary, that is, only one person can receive the income generated by the trust (except that spouses can be co-beneficiaries of the income if they are both U.S. citizens or residents and they file a joint federal income tax return)
During the income beneficiary's lifetime, only he or she can be given principal distributions from the QSST, that is, only that beneficiary can be given the actual stock, and
All of the trust income must be distributed to the income beneficiary
The trust can provide that, when the income beneficiary dies, the principal will pass to other beneficiaries. If the trust continues after the beneficiary's death and continues to hold S Corporation stock, it

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