### Question
How does the law define electing small business trust?


### Answer
Under *26 U.S.C. § 1361*, **electing small business trust** is defined as:

> any trust if—


(i) such trust does not have as a beneficiary any person other than (I) an individual, (II) an estate, or (III) an organization described in paragraph (2), (3), (4), or (5) of section 170(c) which holds a contingent interest and is not a potential current beneficiary,


(ii) no interest in such trust was acquired by purchase, and


(iii) an election under this subsection applies to such trust

#### Citation:
  - *26 U.S.C. § 1361*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter S-Tax Treatment of S Corporations and Their Shareholders > PART I-IN GENERAL**

