Page:United States Statutes at Large Volume 95.djvu/277

 PUBLIC LAW 97-34—AUG. 13, 1981

95 STAT. 251

sentence and if the entire corpus of the trust is includible in the gross estate of the deemed owner, the preceding sentence shall be applied by substituting *2-year period' for *60-day period'. "(C) A trust with respect to stock transferred to it pursuant to the terms of a will, but only for the 60-day period beginning on the day on which such stock is transferred to it. "(D) A trust created primarily to exercise the voting power of stock transferred to it. "(2) TREATMENT AS SHAREHOLDERS.—For purposes of subsection (a)"(A) In the case of a trust described in subparagraph (A) of paragraph (1), the deemed owner shall be treated as the shareholder. "(B) In the case of a trust described in subparagraph (B) of paragraph (1), the estate of the deemed owner shall be treated as the shareholder. "(C) In the case of a trust described in subparagraph (C) of paragraph (1), the estate of the testator shall be treated as the shareholder. "(D) In the case of a trust described in subparagraph (D) of paragraph (1), each beneficiary of the trust shall be treated as a shareholder." (b) QUALIFIED SUBCHAPTER S TRUSTS.—Section 1371 is amended by 26 USC i37i. adding at the end thereof the following new subsection: "(g) SPECIAL RULE FOR QUALIFIED SUBCHAPTER S TRUST.—

"(1) IN GENERAL.—In the case of a qualified subchapter S trust with respect to which a beneficiary makes an election under paragraph (2)— "(A) such trust shall be treated as a trust described in subsection (e)(l)(A), and "(B) for purposes of section 678(a), the beneficiary of such trust shall be treated as the owner of that portion of the trust which consists of stock in an electing small business corporation with respect to which the election under paragraph (2) is made. "(2) ELECTION.— "(A) IN GENERAL.—A beneficiary

of a qualified subchapter S trust (or his legal representative) may elect to have this subsection apply. "(B) MANNER AND TIME OP ELECTION.—An election under this paragraph shall be made— "(i) separately with respect to each electing small business corporation the stock of which is held by the trust, "(ii) separately with respect to each successive income beneficiary of the trust, and "(iii) in such manner and form, and at such time, as the Secretary may prescribe. "(C) ELECTION IRREVOCABLE.—An election under this paragraph, once made, may be revoked only with the consent of the Secretary. "(D) GRACE PERIOD.—An election under this paragraph shall be effective up to 60 days before the date of the election. "(3) QUALIFIED SUBCHAPTER S TRUST.—For purposes of this subsection, the term 'qualified subchapter S trust' means a trust—

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