This course delves into the consequences of trusts owning interests in S corporations and partnerships. This presentation will include a discussion of which trusts are eligible to hold S corporation stock and how they are taxed. The program includes a review of how K-1 income and distributions can have a mismatch and what can be done about it. Additionally, the course examines planning for the passive loss rules and net investment income (NII) tax. The instruction concludes with how to plan for and manage the sale of a pass-through entity.

Learning Objectives: 

• 
  Define how K-1 income can get trapped inside a trust and how to deal with paying taxes and beneficiaries' demands for income 


• Evaluate which trusts can hold S corporation stock—including grantor trusts, qualified subchapter S trusts (QSSTs), and electing small business trusts (ESBTs)


• List deadlines for QSST and ESBT elections and what to do when the deadline is missed 


• Outline the basics of state income taxation and pass-through entity tax election 


• Summarize the rules for passing depreciation deductions to beneficiaries, even when that exceeds income distributed to them


• Determine how trustee material participation works, including what the Frank Aragona Trust case did and did not say


• Identify QSST taxation when an S corporation is sold and general income tax consequences when a non-grantor trust or estate reports the sale of a business

This course assumes a basic understanding of partnership/S corporation income taxation, which one may obtain from the webinar, How to Shift Income to Beneficiaries, or other sources.