A Qualified Subchapter S Trust, commonly referred to as a QSST Election, or a Q-Sub election, is a Qualified Subchapter S Subsidiary Election made on behalf of a trust that retains ownership as the shareholder of an S corporation, a corporation in the United States which votes to be taxed.
Can a QSST be a complex trust?
Under this scenario, the subtrust would elect QSST status, while the original trust could continue to be a complex trust. If the original trust has multiple beneficiaries, then a separate S corporation subtrust would need to be created for each beneficiary.
How do you qualify for QSST?
Under Section 1361(d)(3), for a trust to qualify as a QSST, its terms must require that during the life of the current income beneficiary, the trust will have only one income beneficiary; and all of the trust’s accounting income must either be required by the terms of the trust instrument to be distributed, or actually …
What happens when a trust ceases to be a QSST?
When this occurs, the trust would cease to be a QSST because it would have more than one current income beneficiary. This would lead to loss of S status for the corporation because a trust with two income beneficiaries is not an eligible shareholder.
Can a QSST hold stock in an S corporation?
A QSST is one of several types of trusts that are eligible to hold stock in an S corporation. Its two primary requirements are (1) there can be only one beneficiary of the trust and (2) all income must be distributed at least annually (Sec. 1361 (d) (3) (B)).
How does a QSST report its earnings to the beneficiary?
A QSST does not report earnings to the beneficiary. The S Corporation reports the income to the beneficiary. A QSST is a conduit entity; the beneficiary reports all items of income, loss, deductions and credits on his form 1040 (PLR.(NNN) NNN-NNNN.
Do you need to file a tax return for a QSST?
Tax Professional: winktax, Enrolled Agent replied 6 years ago. A QSST is considered a Grantor trust and not an Irrevocable trust, as such it is not considered a taxable entity. Similar to a revocable living trust, a tax return is not required while the grantor is alive, only when the trust becomes irrevocable is a return required.