Chief Counsel Advice 201327009 Advises on Treatment of Interest Paid by a QSST to Acquire S Corporation Shares – Los Angeles Income Tax Planning and Income Tax Litigation Attorney Bruce Givner

by Bruce Givner on November 27, 2013

With Chief Counsel Advice 201327009, the Internal Revenue Service (IRS) is advising shareholders of a “Qualified Subchapter S Trust” (QSST) how to treat the interest paid when the QSST buys shares of an S corporation. Generally, the income, expense, gains, and losses incurred by an S corporation pass through to its shareholders, which would be the shareholder of the QSST. However, when the gain or loss results from the QSST disposing of its S corporation shares, the QSST is taxed on the gain or loss. Thus any interest paid by the QSST on funds to buy S corporation shares has been treated by some as an expense of the S corporation, thus passing to the QSST’s beneficiary, while others have treated it as a trust expense, taxable to the QSST.

In CCA 201327009, issue May 1, 2013, the IRS stated that interest paid to sell or dispose of S corporation shares is an expense to the S corporation, passable to the QSST, then passable to the trust’s beneficary. Chief Counsel Advice cannot be used or cited as precedent.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Encino, Sherman Oaks, Tarzana, Woodland Hills, Agoura, Westlake Village, Thousand Oaks, Studio City, Burbank, Glendale, Pasadena, Bel Air, Brentwood, Pacific Palisades, Marina Del Rey, Manhattan Beach, Torrance, Irvine, Newport Beach, Las Vegas and adjacent areas. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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