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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 #: X9QQU-T-00799-21-S/O
CE: 2
Speaker: Marcus Dyer, EA

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

COURSE DESCRIPTION
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.

LEARINING OBJECTIVES
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 education@naea.org.

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