Liquidating trust eligible shareholder s corporation eve jihan jeffers dating
Also, no interests in the trust may be acquired by purchase (as defined in the act).
Instead, the trust interests must be acquired by gift, bequest or similar means.
Many of these changes—detailed in this article—improved the flexibility of this form of ownership, making it easier for such businesses to operate and for owners to transfer their interests during their lifetimes and at death. Many of these changes—detailed in this article—improved the flexibility of this form of ownership, making it easier for such businesses to operate and for owners to transfer their interests during their lifetimes and at death. Under prior law, a trust generally was not permitted to own stock in an S corporation, although certain trusts such as qualified subchapter S trusts (QSSTs) were—and remain—eligible.
The act created (effective for tax years beginning after December 31, 1996) an electing small business trust (ESBT) that may be an eligible S corporation shareholder.
Long-term or short-term classification of a liquidation that qualifies for capital gain treatment depends on the shareholder’s holding period, with long-term status having significant importance due to the 15% tax rate cap on long-term capital gains.
Shareholders in the 35% tax bracket achieve a 57.1% ((35% – 15%) ÷ 35%) tax savings on capital gain versus ordinary income.
his article discusses major changes and developments that directly affect S corporations and their tax advisers during the period of this update (July 10, 2012–July 9, 2013).
For tax years beginning in 2012 or 2013, if the prior year was the fifth calendar year or later in the recognition period, then any recognized gain is not subject to the BIG tax (the BIG tax holiday).That means that, for most families, it is an acceptable strategy to cause assets to be included in the decedent’s estate at death to get a basis “step-up.” Thus, succession plans that have been in existence for a while should be re-examined. For family businesses involving an S corporation, some sort of shareholder buy-out agreement is a practical necessity.Over time, however, if that agreement is not revisited and modified, the value stated may no longer reflect reality.The Small Business Job Protection Act, passed by Congress in August 1996, was intended to provide tax breaks for small businesses as well as to impose tighter rules on expatriates, foreign trusts and entities doing business in Puerto Rico.Also included in the act were numerous changes to the rules governing the use of S corporations.
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In general, the difference between the two trusts is that the ESBT itself is treated as an S corporation shareholder whereas the beneficiary of a QSST is considered the S corporation shareholder.