What This Notice Means
The IRS revoked your Electing Small Business Trust, or ESBT, election. An ESBT is a trust that elected special treatment so it can hold stock in an S corporation. That election is no longer in effect.
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.
Tell the S Corporation
An S corporation can only have certain types of shareholders. A trust that holds S stock needs a valid basis for doing so, and an ESBT election is one of them. If the trust still holds S corporation stock, the corporation needs to know about this revocation now. The corporation and the trustee should get advice on what it means for the corporation's S election.
If You Didn't Expect This
If the trust didn't ask to revoke the election and you don't understand why it happened, call the number on your notice. Find out what the IRS relied on and the date the revocation took effect.
Keep the Records Together
Store this notice with the original ESBT acceptance notice, the trust agreement, and the trust's Form 1041 filings. If the trust's status or the corporation's status is questioned later, these documents tell the story.
Trustees have a duty to keep the trust's filings current. File every required Form 1041 on time.
If you received a CP291 notice and the trust holds S corporation stock, call us at (813) 229-7100.