ESBT Tax Compliance After Tax Reform: Form 1041 Reporting of Electing Small Business Trusts

Separate Calculations for S Corp and Non-ESBT Income, Section 199A Computations, Potential Current Beneficiary Rules

This program is postponed. New date TBD.

A live 110-minute CPE webinar with interactive Q&A


Sunday, December 30, 2018

1:00pm-2:50pm EST, 10:00am-11:50am PST

(Alert: Event date has changed from 10/11/2018!)

or call 1-800-926-7926

This webinar will provide fiduciary tax advisers and compliance professionals with a thorough and practical guide to the tax reporting challenges of electing small business trusts (ESBTs) after the new tax reform law. The panel will discuss the separate calculations of S corporation income components of ESBTs and detail the specific changes the new law makes to ESBT reporting, including the Section 199A deduction, differences in eligible shareholders, and reduction in charitable contribution deductions.

Description

Determining the proper income tax reporting treatment of ESBTs often presents significant challenges to fiduciary tax advisers and compliance professionals. Several provisions in the recent tax reform law have introduced additional complexities in the tax treatment of ESBTs while at the same time likely increasing the frequency of their use.

An ESBT is a trust that through election is eligible to hold S corporation stock as well as other non-ESBT assets. Unlike the more generally straightforward Qualified Sub-S Trust, an ESBT may have multiple beneficiaries, and may elect to accumulate trust income or sprinkle the income among various beneficiaries.

For tax reporting purposes ESBTs are treated as two separate trusts. Treas. Reg. 1.641(c)-1 requires ESBTs to calculate income tax on its share of S corporation income separately from all other trust income. The ESBT’s S corporation income is taxable to the trust rather than beneficiaries, regardless of whether it has been distributed to the beneficiaries.

Tax reform resulted in critical changes to ESBT reporting. The Section 199A deduction for pass-through entities applies to the S corporation income of an ESBT, and is calculated at the entity level. The law also changed the treatment of charitable contributions made by the S corporation, subjecting the deductions to individual limitations but allowing carryforwards. Additionally, the rules on potential current beneficiaries has been expanded to allow nonresident alien individual beneficiaries.

Listen as our experienced panel of fiduciary tax advisers provides a thorough and practical guide to the tax reporting challenges of ESBTs.

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Outline

  1. ESBT rules
    1. Contrast with QSSTs
    2. Right to accumulate income
    3. Potential current beneficiary determination
    4. Intersection with grantor trust rules
  2. Separately calculating S corporation/ESBT income
  3. Section 199A deduction applicable to S corporation component of ESBT income
  4. Other tax reform changes impacting ESBT reporting
  5. Planning opportunities and illustrations

Benefits

The panel will discuss these and other important topics:

  • How to determine potential current beneficiaries and the risks involved in misidentification of a PCB
  • How to allocate between S corporation income and non-ESBT income in calculating tax for an ESBT
  • What changes did the new tax reform law impose on ESBT beneficiary eligibility and deductions?
  • Key differences between QSST and ESBT tax treatment, and planning opportunities between the two structures

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