Liquidating trust eligible shareholder s corporation dating older guys in high school
The C corporation pays taxes on its annual income and then its shareholders pay tax on any dividends they receive from the business.
With an S corporation, the business does not pay any tax on its annual income.
In exchange for these benefits, an S-corp is subject to several restrictions, including which entities can own shares in the business.
Based on these restrictions, it is fair to question whether a trust can own S-corp shares.
To qualify, the trust can only have one beneficiary that benefits from the S-corp stock; if the trust terminates, that beneficiary must get all of the trust’s assets.
While this is the basic form of a trust, there are many different types, with specific characteristics that set each apart.
Instead of the business paying taxes on its annual income, the profits and losses are divided among the shareholders to include on their personal returns.
This enables the S-corp to avoid the “double-taxation” that a corporation faces.
These restrictions on who can own S-corp stock are included to ensure the business’s income is taxed by the IRS the year it is earned.
There are six types of permissible trusts under section 1361(c)(2) of the U. tax code, and additional permissible trusts defined by section 1361(d).