S Corporations: QSUB Elections

Description

Consider the factors that determine whether a QSUB election should be made. Discuss topics covering both immediate and long-term tax consequences and the process necessary to make the election. If an S corporation owns 100% of the stock of another corporation, the tax consequences of the operation of the subsidiary will depend on whether the S corporation makes a 'qualified subchapter S subsidiary election' (QSUB election). We'll examine the tax compliance requirements necessary to successfully make the QSUB election.

Highlights

• Requirements that must be satisfied to make the QSUB election.
• How to make the QSUB election.
• Immediate tax consequences of the election, "deemed liquidation."
• Potential complications of "deemed IRC 332 liquidation."
• Situations where the QSUB election could be desirable.
• Situations where the QSUB election could be undesirable.
• Longer-term consequences of the decision to elect or not elect.
• Terminations of QSUB election

Objectives

• Identify and discuss the requirements that must be satisfied to make the S corporation election.
• Recognize complications related to having trusted, estates, tax-exempt and ESOP shareholders.
• Review and application of the one class of stock requirement to accomplish continued qualification.
• Determine tax planning ideas to accommodate economic participation by disqualified investors.
• Identify the process that must be followed to make the election, including when the election must be made and the consequences of a defective election.
• Recognize tax planning opportunities related to voluntary termination.
• Identify the possible application of the inadvertent termination rule to avoid an unplanned termination.
• Recognize limitation on re-electing after a termination.

Designed For

CPAs and Lawyers.