What This Notice Means
The IRS accepted your election or treatment as a Qualified Subchapter S Trust, or QSST. A QSST is a type of trust that can hold stock in an S corporation. This notice confirms the election is in place.
What to Do
- Timely file Form 1041, U.S. Income Tax Return for Estates and Trusts.
- Keep this notice for your records.
- Give a copy to the trust's tax preparer and to the S corporation.
Ending the Election
You can't simply drop a QSST election. It can only be stopped with the permission of the Commissioner of Internal Revenue. The procedure is described in Internal Revenue Bulletin 2012-1.
Treat this election as long term. If circumstances change and you think the trust should no longer be a QSST, get advice before taking any step.
Why This Notice Matters
An S corporation can only have certain types of shareholders. A trust that holds S stock needs to qualify. If the trust's status is ever questioned, the S corporation's own election can be at risk. This notice is your proof the IRS accepted the QSST election. Store it with the trust documents and the corporation's records.
Helpful References
- Form 1120-S, U.S. Income Tax Return for an S Corporation.
- Publication 542, Corporations.
- IRS guidance on S corporation stock and debt basis.
Trustees should keep the trust's Form 1041 filings current every year. Late or missing trust returns create problems that are easy to avoid.
If you received a CP288 notice and have questions about the trust's filings, call us at (813) 229-7100.