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Sec. 1361(a)(1) defines an "S corporation," with respect to any tax year, as a small business corporation for which an S election is in effect for that year.
Sec. 1361 (b) defines "small business corporation" as a domestic corporation that is not an ineligible corporation and that does not have (A) more than 75 shareholders, (B) as a shareholder a person (other than an estate, a trust described in Sec. 1361(c)(2), or an organization described in Sec. 1361(c)(6)) who is not an individual, (C) a nonresident alien as a shareholder and (D) more than one class of stock.
Sec. 1361(d)(1)(A) provides that in the case of a qualified subchapter S trust (QSST) with respect to which a beneficiary makes an election under Sec. 1361(d)(2), the trust will be treated as a trust described in Sec. 1361(c)(2)(A)(i) (relating to trusts that may be shareholders of a small business corporation under Sec. 1361(b)(1)).
Sec. 1361(d)(2) (C) provides that a QSST election under Sec. 1361(d), once made, may be revoked only with IRS consent.
Sec. 1361(c)(2)(A)(v) provides that an electing small business trust (ESBT) (as definded in Sec. 1361 (e)) is a permitted S shareholder. Sec. 1361(e)(1)(B) provides that the term "ESBT" does not include any QSST if an election under Sec. 1361(d)(2) applies to any corporation the stock of which is held by the trust. Sec. 1361(e)(3) provides that an ESBT election applies to the tax year of the trust for which it is made and all subsequent tax years of the trust unless revoked with IRS consent.
Sec. 1377(a) provides rules for determining a shareholder's pro rata share of any item for any tax year.
This revenue procedure provides guidance on how to convert a QSST to an ESBT, or an ESBT to a QSST A trust that wishes to convert within 36 months of a previous conversion must submit an application for consent to revoke the QSST or ESBT election to the Service in the form of a letter ruling...