Qualified Subchapter S Trusts (QSSTs)

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There are many issues with a QSST, however this article currently will only deal with how to report the income.

The S corporation income is not included on the QSST Form 1041 under Reg. 1.1361-1(j)(7) Treasury Regulations, Subchapter A, Sec. 1.1361-1 The beneficiary is taxed on the items received by the trust from Form 1120S Schedule K-1 under IRC Sec.678(a)Sec. 678. Person other than grantor treated as substantial owner, IRC Sec 1361(d)(1)(B)Sec. 1361. S corporation defined and therefore it is not reported to the beneficiary on the QSST's Form 1041 Schedule K-1 but in a manner similar to that of a grantor trust. It should also be noted that the beneficiary is taxed on the income even if no cash distributions were received.

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