The Third Circuit Court of Appeals has affirmed the Tax Court on an appeal arising out of nine consolidated cases regarding the tax implications of an S Corporation’s election to treat its subsidiary as a qualified subchapter S subsidiary, or Qsub, under Section 1361 of the Tax Code.

Specifically, the parties disagreed as to whether the Qsub election and subsequent sale of the S Corporation parent created an item of income under Section 1366(a)(1)(A).

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