Accommodation of S Corporation Stock

• Author: Jerold I. Horn
• Profession: Lawyer
• Pages: 417-418

417

I. FORM 15.1: THE TRUST

(3) Special Assets Remainder Trust. Notwithstanding the preceding portion of this

subsection (B), the Trustee shall set apart in (or, as the case may be, pay to) a separate

trust, to be known as the “Special Assets Remainder Trust” and to be administered

according to provisions that are identical to those that apply to the Remainder

Trust, except that the Trustee shall not pay any of the trust estate to other than

my wife during the life of my wife

a [, that subsection (1)(a) of this subsection (B) shall not apply]

and that the Trustee shall pay the net income to my wife quarter-annually during

any period that the Independent Trustee in its sole and absolute discretion deter-

mines, so much or all, if any, of the trust estate (or what absent this subsection

(3) would be the trust estate) of the Remainder Trust as the Independent Trustee

in its sole and absolute discretion determines to be advisable from time to time.

II. PURPOSE OF FORM 15.1

Inclusion of S corporation stock in a trust during more than a brief time requires (i) a

vehicle that a single individual is regarded as owning for income tax purposes accord-

ing to the grantor trust rules (Code Sections 671-79); (ii) a qualied subchapter S trust

(“QSST”) according to Code Section 1361(b)(1)(B), (c)(2), and (d); or (iii) an electing small

business trust (“ESBT”) according to Code Section 1361(b)(1)(B), (c)(2), and (e). QSST

status requires either that the trust require the trustee to distribute all income currently

to a single individual or that the trustee in fact distribute all income currently to a single

individual. Code §1361(d). Additionally, during the life of the same individual, the trust

must not permit any distribution of principal to any other person. Form 15.1 also per-

mits creation of a separate trust as a receptacle for other assets (for example, residences

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Accommodation of

S Corporation Stock