S Corporations: Built-in Gain Tax

Description

When an existing corporation considers making the S corporation election, the potential corporate-level "built-in gain tax" (IRC 1374) is often the most important tax cost to evaluate. Learn when and how the built-in gain tax is determined.

Discuss topics that include the application of multiple 'limitations' on determining the tax and the potential use of existing corporate net operating losses and tax credits. Identify and evaluate tax planning ideas and strategies. Also, consider changes made by the 2017 Tax Cuts Jobs Act.

Highlights

• Identification of facts that could cause the imposition of the built in gain tax
• The calculation of the tax on "net recognized built in gain" during "recognition period"
• The meaning of "current mandatory double tax"
• The aggregate limitation based on "net unrealized built in gain"
• The limitation based on the "gain" that existed at conversion
• The importance of valuation analysis at conversion
• The taxable income limitation
• Using existing corporate net operating losses and tax credits
• Tax planning ideas and strategies to minimize or avoid the tax on built in gain

Objectives

• Identify when the built in gain tax could apply.
• Calculate the built in gain tax including application of three "limitations."
• Recognize the nature of the built in gain tax, "current mandatory double taxation."
• Recognize tax planning techniques to minimize or eliminate the built in gain tax.

Designed For

CPAs and attorneys.