Can a Roth IRA be a Shareholder in an S Corporation?

Abstract

<p>Initially, as enacted in 1958,<strong>1 </strong>trusts could not be shareholders in an S corporation.<strong>2 </strong>In a series of enactments beginning in 1982, several different types of trusts were authorized to hold stock in an S corporation including grantor trusts,<strong>3 </strong>grantor trusts that continue to hold stock after death of the deemed owner for up to two years,<strong>4 </strong>testamentary trusts for up to two years,<strong>5 </strong>voting trusts,<strong>6 </strong>electing small business trusts<strong>7 </strong>and, in the case of a corporation which is a bank, “. . . a trust which constitutes an individual retirement account under section 408(a), including one designated as a Roth IRA under section 408A, <em>but only to the extent</em> <em>of the stock held by such trust in such bank or company . . . .</em>”<strong>8 </strong>In addition, under a special rule, a “Qualified Subchapter S Trust” can hold stock in an S corporation by election with the trust treated as a grantor trust.<strong>9</strong></p>