What is a QSST trust?

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.

Is a QSST considered a grantor trust?

The main benefit of a QSST is that it is treated as a grantor trust and therefore considered an eligible S corporation shareholder.

Does a QSST have to file a 1041?

For a QSST, a Form 1041 must be filed each year. Also, regardless of the reporting method used (i.e., a Form 1041 or one of the alternative methods), the grantor tax information letter must be sent to each deemed owner.

Can a QSST be a GST trust?

GST Trusts Should have S-Corp Language. Qualified Subchapter S Trusts can be set up under Section 1361(d) of the Code (“Qualifying Subchapter S Trust” or “QSST”) or under Section 1361(e) of the Code (“Electing Small Business Trust” or “ESBT”).

How do you qualify for QSST trust?

Designing a QSST

1. The trust must have only one income beneficiary during the life of the current income beneficiary, and that beneficiary must be a U.S. citizen or resident;
2. All of the income of the trust must be (or must be required to be) distributed currently to the one income beneficiary;

Can a QSST be an irrevocable trust?

The two-year limitation for S corporations to have as a shareholder either a testamentary trust or living trust that becomes irrevocable can be avoided by electing to convert the trust to a Qualified Subchapter S Trust, commonly referred to as a QSST.

How is QSST income taxed?

Although the S corporation income of a QSST is taxed to the individual income beneficiary, capital gain on the sale of the S corporation stock is taxed at the trust level. If the QSST’s AGI exceeds the threshold amount, the QSST would owe the net investment income tax on the capital gain.

How are QSST trusts taxed?

Is a QSST irrevocable?

Can a QSST have more than one beneficiary?

A QSST requires that there be no more than one beneficiary and that all of the trust accounting income (and principal, if any) be distributed to that beneficiary, at least annually. A QSST cannot accumulate income.

How does a QSST work?

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.

Does a QSST have to distribute income?

Background. 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)).