8973 / What is a qualified subchapter S trust (QSST)?
A QSST is a trust that has only one current income beneficiary (who must be a citizen or resident of the U.S.), all income must be distributed currently, and the trust corpus may not be distributed to anyone else during the life of such beneficiary. The income interest must terminate upon the earlier of the beneficiary’s death or termination of the trust. If the trust terminates during the lifetime of the income beneficiary, all trust assets must be distributed to that beneficiary. The beneficiary must make an election for the trust to be treated as a QSST.1
Planning Point: When the stock is initially transferred to the trust, the taxpayer must file a separate S corporation election. For both the QSST and the electing small business trust (ESBT, see Q 8974), the election must be filed “within the 16 day and two month period beginning on the day that the stock is transferred to the trust.2
1. IRC § 1361(d).
2. Treas. Reg. §§ 1.1361-1(j)(6)(iii); 1.1361-1 (m)(2)(iii).
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