Tax planning and considerations: S corporation targets
Approval of an S election by the IRS and/or a state jurisdiction does not mean that S corporation status remains safe and sound forever.
Qualifications & Considerations
Current developments in S corporations
This annual update on S corporations covers cases, regulations, and IRS rulings that have been issued in the last year, including the rules for eligible terminated S corporations.
New rule on nonresident aliens in an S corporation
The TCJA provides a way to avoid the unexpected termination of the S election when certain ESBT situations occur.
Nonresident alien as an indirect S corp. shareholder
The TCJA fundamentally relaxed the rules on S corporation ownership by allowing nonresident aliens to be potential current beneficiaries of ESBTs and, therefore, indirect corporation shareholders.
Current developments in S corporations
This update on recent developments in taxation relating to S corporations includes cases and rulings on eligible shareholders, electing small business trusts, inadvertent S election terminations, and other issues, as well as changes made by the TCJA.
Using qualified Subchapter S trusts (QSSTs)
The QSST may be useful for estate planning purposes and for holding S stock for the benefit of a minor or incompetent.
Current developments in S corporations
The AICPA S Corporation Taxation Technical Resource Panel offers a summary of recent court decisions and IRS guidance.
Top 10 Easy Ways That Trusts Cause Loss of S Corporation Status
This item presents 10 ways that S corporations can lose their S election status, most of them involving trusts.
Ordinary Deduction for Worthless QSub Stock
Restructuring an existing QSub in an attempt to qualify for an ordinary deduction is prohibited and might result in an unfavorable deferral of loss.
IRS Clarifies That a Former QSub Cannot Prorate Post-Termination Items of Income or Loss
IRS addressed whether an S corporation and its wholly owned subsidiary, a QSub, must prorate annual income following a midyear voluntary revocation of subchapter S election.
Making a Trust an Eligible S Corp. Shareholder: QSST and ESBT Elections
This item describes eligible shareholder trusts and the elections they must make.
QSST Not Necessarily Required to Pay All Income to Beneficiary
If a qualified subchapter S trust (QSST) owns both S corporation stock and other assets, determining whether the income from the other assets must be distributed to the beneficiary depends on the terms of the trust document.
QSub Election Does Not Increase Shareholder Stock Basis
The Tax Court held that shareholders of an S corporation improperly increased the adjusted basis of their S corporation stock when the S corporation made a QSub election for its wholly owned C corporation subsidiary.
QSub Status Is Not Property of Bankruptcy Estate
An S corporation’s revocation of its S corporation status, which caused its QSub subsidiary to lose its status as a QSub, was not a post-bankruptcy-petition transfer of property of the QSub’s bankruptcy estate.
Current Developments in S Corporations
During the period of this S corporation tax update, some major changes that directly affect S corporations took place. This article also presents tax planning ideas for S corporations and their shareholders.
Operating a QSub
A qualified subchapter S subsidiary (QSub) is a subsidiary corporation 100% owned by an S corporation that has made a valid QSub election for the subsidiary.
Regs. Extend Religious and Family Member FICA, FUTA Exceptions to Disregarded Entities
Temporary and proposed regulations extend the religious and family member FICA and FUTA tax exceptions to disregarded entities.
QSSTs and ESBTs: No Longer Mutually Exclusive
Under Letter Ruling 201122003, if a current ESBT allows for separate and independent trust shares under the trust document, a trust may be treated as both an ESBT and a QSST. This ruling opens the door for additional planning for gifts of S corporation stock to younger generations.
Current Developments in S Corporations (Part II)
This article discusses S corporation eligibility, elections, and termination issues from the period July 2009–July 2010.
QSubs Included in Definition of S Corp. for Purposes of Sec. 291(a)(3)
In Vainisi, the Seventh Circuit reversed a decision in which the Tax Court held that the 20% interest expense reduction imposed by Sec. 291(a)(3) would apply to a qualified subchapter S subsidiary (QSub) bank even for its tax years following the third year after it converted from C corporation to S corporation status.
