Today TaxMama® hears from Todd in the TaxQuips Forum who is looking to the future. “I am transferring ownership of a sub-chapter S corporation from myself to a family trust. I have a question on IRS form 2553, in part K, where I need to list both former and current owner of the corporation. Since I am a 100% owner transferring it to the trust, do I place a 0% ownership for myself and 100% for the trust? The trust has its own EIN, and I have filled out the information for the QSST option for the trust, as well in part 3.”
Taking this step is a good idea. But you need to read the instructions for column L. (see page 4)
Logic would indicate that you list the current owner with the 100% interest and the date acquired at the top. And on the next line, list the former owner with 0% interest and the date acquired. Include a cover letter explaining the transfer.
Make absolutely SURE that there is no tax effect for the transfer, which is, effectively, a sale of stock from an individual to a trust. No doubt, there is specific paperwork to effect this transfer in a tax-free manner. Having never done this, I don’t know what the specific procedure is.
Talk to an estate and trust attorney to make sure you do this correctly – otherwise, this may turn into a taxable event. Seriously. Take care to cross the t’s and dot the i’s here.
Perhaps someone who has done this can step in and offer some additional guidance?
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