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Ensure Your ESBT ElectionsEnsure Your ESBT Elections
Private Letter Ruling 200819006, issued May 9, 2008, reminds planners to be careful when using electing small business trusts (ESBTs) to hold S corporation stock. The taxpayer in this case was fortunate. But unless practitioners pay close attention to whether trusts qualify for the ESBT election, their clients may not be so lucky. And, given that the consequence of failing to qualify as an ESBT is
David T. Leibell & Daniel L. Daniels, partners in the Stamford, Conn., office of Wiggin and Dana
Private Letter Ruling 200819006, issued May 9, 2008, reminds planners to be careful when using electing small business trusts (ESBTs) to hold S corporation stock. The taxpayer in this case was fortunate. But unless practitioners pay close attention to whether trusts qualify for the ESBT election, their clients may not be so lucky. And, given that the consequence of failing to qualify as an ESBT is dire — the corporation loses its S status — every planner working with S corporations and trusts should examine this ruling.
Before the advent of the ESBT election, a trust qualified as an S corporation shareholder only under fairly limited circumstan...
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