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Built In Cap Gains: Converting C Corp to S Corp

Built In Cap Gains: Converting C Corp to S Corp
Date: December 8th, 2021 2:00 - 4:00pm ET
IRS Program #:
CE: 2
Speaker: Marcus Dyer, EA

Avoiding the Pitfalls of Built-in Capital Gains Tax (converting from C to S Corporations)

This topic is the subject of an IRS audit campaign

Converting from C corporation to S corporation status can benefit many companies from tax and operation standpoints. C corporation owners can convert their company to an S corporation without triggering an immediately taxable transaction in most cases. However, several potential tax traps can arise in a conversion if not properly planned. One of the most frequent and costly tax implications of a C-to-S conversion is the built-in-gains (BIG) tax of Internal Revenue Code Section 1374. 

Taxable BIG occurs when an S corporation sells or distributes certain specified assets within five years after its conversion date from C corporation status, or when a converted S corporation acquires assets with a carry-over basis from a predecessor C corporation. Because the BIG tax is imposed at the top tax rate for corporations, tax advisers should look closely at asset planning before completing the S corporation conversion. This course provides guidance on how tax practitioners can help their clients avoid the pitfalls of BIG tax.

After completing this course attendees will be able to:

  • Recognize when the built-in gain tax could apply.
  • Learn how to Calculate the built-in gain tax
  • Understand the importance of valuation analysis of corporate assets subject to BIG tax
  • Identify tax planning techniques to minimize or eliminate the built-in gain tax.

Continuing Education
This course qualifies for IRS Continuing Education Hours. NAEA reports IRS CE on a monthly basis. If you have not received your CE Hours in your IRS PTIN Account by the end of the month after receiving the certificate, please contact NAEA at

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