If a trust disposes of all of the stock which it holds in an S corporation, then, with respect to such corporation, the term “potential current beneficiary” does not include any person who first met the requirements of the preceding sentence during the 1-year period ending on the date of such disposition. 110–28, § 8234(a), designated existing provisions as cl.
An election under this subsection shall be made by the trustee.
The two-year limitation for trusts being S corporation shareholders can also be avoided if the trust qualifies as an Electing Small Business Trust, commonly referred to as an ESBT.
Like a QSST, the election must be made in writing and within two months and 15 days of the trust becoming a shareholder.
This election must be made within two months and 15 days of the trust becoming a shareholder and is done notifying the IRS of the election in writing and signing the consent required on IRS Form 2553.