Q:

Subject: capital gains

 

If my parents put their home in a realty trust in 2004 and they passed away and the gain on the sale of the house is $600,00 do I get a stepped up basis as of the time of their death or does that fact that it is in a realty trust change that?

A:

You are going to need to consult with someone who can analyze the specific facts more closely because there are many different kinds of trusts.  If it is a QPRT (Qualified Personal Residence Trust), there are different consequences depending on how long the trust was established for.  In some cases, the basis does get stepped up, while in others it remains the same as it was for your parents.

You can get a flavor for how complicated this can be by Googling for QPRT, such as in this article.

I would think that you could probably get a good answer by consulting with either the attorney who set up the trust or the accountant who has been keeping the books and preparing the tax returns for the trust, if it is one of the types that requires annual income tax returns.

Good luck.

Kerry Kerstetter

 

Q:

Subject: S corps

Just read your article – have a couple of questions.

 

1.  Can an S corp own another S corp with the second S corp having addl shareholders?

 

2.  Is there an S corp structure that does not allow addl stockholders.  For instance – you have an S corp -as an S corp another entity is purchased – can the addl entity have additional owners or must they be the same as the parent S corp.  The purchased entity not being an S Corp.

 

I guess both of these questions are basically the same.  What I have is an S corp for sale, possibly being purchased by another S corp…..the stockholders of the purchasing S Corp have indicated they CANNOT have other stockholders for just the new purchase.  It has been indicated that the purchasing S corp is some special type of S corp….

 

Anyway – any information would be helpful.

 

Thanks!

A:

This is most definitely a very complicated area where a professional tax advisor should be involved. 

There are ways for an S corp to own another S corp as what is called a QSub (Qualified Subchapter S Subsidiary).  You can check IRS Form 8869  and see what is involved.

Good luck.

Kerry Kerstetter