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State Fiduciary Income Tax (Kaestner); S Corp. Ownership; Basis Step-Up Strategies


The U.S. Supreme Court decided Kaestner regarding a state’s ability to impose income taxation on a trust. We will discuss the holding and its context when trusts hold business interests. Recent regulations and rulings regarding S corporation ownership are worth noting. Finally, basis step-up is becoming more important than estate tax planning for many taxpayers; we will discuss trust modifications (including a possible formula general power of appointment) and other tools.

You will learn:

  • What Kaestner did and didn’t do regarding the constitutional limits imposed on state income taxation of trusts.
  • How state income taxation of business operations and sales of businesses affect trusts that own businesses.
  • How the government protects against revenue loss from recent changes expanding who beneficiaries of trusts owning S corporations can be.
  • When shareholder agreements governing sales of S corporation are or are not likely to violate the single class of stock rules, contrasting two 2019 private letter rulings.
  • Various strategies to plan basis when a beneficiary dies.
  • How one might consider including a formula general power of appointment to maximize basis step-up.
  • Whether a trust modification may trigger gift/estate/GST tax consequences.

The live presentation of this webinar was approved for 1.8 hours of general credit in Missouri and 1.5 hours of general credit in Illinois and California. CLE credit is no longer available for this recording. 

Steve Gorin

*Please note that this is a 90-minute webinar

For technical materials supporting the slides, see Steve's newsletter.

Steve's current materials, Structuring Ownership of Privately-Owned Businesses: Tax and Estate Planning Implications, are available by emailing sgorin@thompsoncoburn.com

Originally Presented:
July 23, 2019