QUALIFIED SUBCHAPTER S-CORPORATION TRUST
Back to GlossaryDefinition
A trust that is allowed to own stock in S-Corporations.
Summary
A Qualified Subchapter S-Corporation Trust (QSST) is a special type of trust that allows S-Corporation stock to be held in trust while maintaining the company's S-Corporation tax status. This trust structure enables S-Corporation owners to transfer shares to beneficiaries through a trust arrangement without losing the favorable pass-through taxation benefits. The trust must meet specific IRS requirements, including having only one current income beneficiary who receives all trust income, and the beneficiary must be a U.S. citizen or resident.
Usage Context
Understanding QSSTs is crucial when studying business succession planning, estate planning strategies, S-Corporation taxation rules, and trust administration in business contexts.
Common Confusions
- Confusing QSST with ESBT (Electing Small Business Trust) - both can hold S-Corp stock but have different rules
- Thinking multiple beneficiaries can receive current income distributions
- Assuming the trust pays taxes instead of the beneficiary
- Believing any trust can hold S-Corporation stock without special qualification
