### Question
How does the law define qualified subchapter S subsidiary?


### Answer
Under *26 U.S.C. § 1361*, **qualified subchapter S subsidiary** is defined as:

> any domestic corporation which is not an ineligible corporation (as defined in paragraph (2)), if—


(i) 100 percent of the stock of such corporation is held by the S corporation, and


(ii) the S corporation elects to treat such corporation as a qualified subchapter S subsidiary

#### 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**

