How do you terminate a QSub election?
(2) An election to treat a subsidiary as a QSub terminates if the S corporation transfers 100 percent of the QSub stock (whether by sale or reorganization under § 368(a)(1)(A), (C), or (D)), to another S corporation in a transaction that does not qualify as a reorganization under §368(a)(1)(F).
Can an LLC have a QSub?
Unlike a single-member LLC, however, the state law existence of a QSub as a corporate entity, as well as certain longstanding federal tax doctrines regarding corporate entities, create issues and complexities that are unique to the QSub regime.
What is a QSub election?
A parent S corporation uses Form 8869 to elect to treat one or more of its eligible subsidiaries as a qualified subchapter S subsidiary (QSub). The QSub election results in a deemed liquidation of the subsidiary into the parent.
When must a QSub election be made?
The parent S corporation can make the QSub election for an eligible corporation at any time during the tax year. However, the requested effective date of the QSub election generally cannot be more than: 12 months after the date the election is filed, or. 2 months and 15 days before the date the election is filed.
Is a QSub a disregarded entity?
A QSub is normally treated as a disregarded entity for all purposes of the Code (Secs. 1361(b)(3)(A)(i) and (ii)). However, the IRS is authorized to treat it as a separate entity for certain purposes (Sec.
How does a QSub work?
A QSub is a domestic corporation that itself would be eligible to make an S corporation election and is 100 percent owned by an S corporation that makes the QSub election for its subsidiary. For federal income tax purposes, the QSub is not treated as a separate corporation.
How do I report QSub on my tax return?
Tax return reporting Because a QSub is a disregarded entity, for purposes of Schedule M-3, Schedule L, and the Form 1120S tax return in general, the subsidiary is deemed to have liquidated into the parent S corporation. As such, all QSubs are treated as divisions of the S corporation parent.