You have to take the infant seat adapter off. You can hold it with the regular seat if it's facing out. I usually just take the seats off to hold it b/c it's easier for me to get it in my suv.
I thought you could fold it with the car seat adapter if it's in the position closest to the handle, it's been awhile though, so I could be wrong... only one way to find out, try it
Re: city select folding with carseat attachment