What is 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 a simple or complex trust?

Separate Trust Under this scenario, the subtrust would elect QSST status, while the original trust could continue to be a complex trust. Each separate trust (or subtrust) would need to have a separate employer identification number and file a separate income tax return (Regs.

Is a QSST trust 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. The interest terminates when the trust terminates or the beneficiary dies, and at that point principal and income must be distributed to the beneficiary (or the beneficiary’s estate).

How is QSST status elected?

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 be …

What is the difference between simple trust and complex trust?

A simple trust must distribute all its income currently. Generally, it cannot accumulate income, distribute out of corpus, or pay money for charitable purposes. A complex trust is any trust that does not meet the requirements for a simple trust.

Can a trust change from complex to simple?

The rules for a complex trust (see Explanation: §661, Deduction et seq.) will apply for the tax year in which amounts other than income are distributed. The trust may then revert to simple trust status in later years.

What type of trust is a grantor trust?

A grantor trust is a trust in which the individual who creates the trust is the owner of the assets and property for income and estate tax purposes. Grantor trust rules are the rules that apply to different types of trusts. Grantor trusts can be either revocable or irrevocable trusts.

What is the purpose of a QSST?

Since the purpose of the QSST is to effectively treat the current income beneficiary as the owner of the S Corporation stock, a net passive activity loss from the S Corporation to the QSST should be passed through to the current income beneficiary who will then apply the passive activity rules to his or her own …

What type of trust is an ESBT?

The ESBT is treated as a single trust for administrative purposes, such as having one taxpayer identification number and filing one tax return. See § 1.1361-1(m).

How is a QSST 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.

What is the tax benefit of a trust?

Another of the main tax benefits of trusts is that the beneficiary does not have to pay taxes on any undistributed income generated during the tax year. Undistributed income is usually defined as any income generated by the assets held in the trust.

What is a qualified revocable trust?

A qualified revocable trust is a trust treated as owned by the trust’s grantor during the grantor’s lifetime by virtue of certain powers the grantor held under the trust agreement.

What is a Qualified Income Trust (QIT)?

A qualified income trust (QIT), also known as a Miller Trust, is an irrevocable trust specially designed to legally divert an individual or married couple’s income into a trust resulting in the income being excluded for purposes of determining eligibility for nursing home (“institutional”)…