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An S corporation (or S Corp), for United States federal income tax, is a closely held corporation (or, in some cases, a limited liability company (LLC) or a partnership) that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. [1] In general, S corporations do not pay any income taxes.
This summary is based largely on the summary provided by the Congressional Research Service, a public domain source. [1]The Permanent S Corporation Built-in Gains Recognition Period Act of 2014 would amend the Internal Revenue Code of 1986 to reduce from 10 to 5 years the period during which the built-in gains of an S corporation are subject to tax and to make such reduction permanent.
The taxation of cooperative corporations in the United States is subject to special rules under subchapter T of the Internal Revenue Code, different from both subchapter C and subchapter S corporations.
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The beneficiary of such a trust makes a QSST election for each S corporation in which the trust holds stock. A trust is eligible to hold S corporation stock if it is a Subpart E trust ("grantor trust"), a testamentary trust, a voting trust, a qualified Subchapter S trust ("QSST"), or an electing small business trust ("ESBT"). [1]
In 1991, P. D. W. & A., Inc., an insolvent corporation taxed under Subchapter S, excluded its entire discharge of indebtedness amount from its gross income. [1] David Gitlitz and other shareholders were assessed tax deficiencies because they used the untaxed discharge of indebtedness to increase their basis in S corporation stock and to deduct suspended losses.