Question - remove bldg from s-corp w/o a tax. Bldg bought 10 years ago by s-corp. Mortgage was paid off w personal funds. s-corp began paying rent to individual owner.

[frank2236]

Building bought about 10 years ago and put into S-corp against my advice.  About a year ago sole shareholder paid off the mortgage and began collecting rent from the S-Corp (saying she was now the owner).  How do I transfer the building to the shareholder without triggering a tax.  Can I just record a distribution of an amount equal to basis? Must any such distribution be at market value? Must it be a purchase a current market value?

[abctax55 · Accepted solution]

"  How do I transfer the building to the shareholder without triggering a tax." 

You can't.   It comes out of the Corp @ FMV.

And this is the shining example of WHY real estate (or, any appreciating asset) should never be put into a Corporation.

[frank2236]

agree but she would not follow my advice at the time - would it be better to close the S-corp, distribute the assets and start over?

[abctax55]

Maybe...but as I don't have all the info, I can't answer that question.

[TaxMonkey]

unclear why you think that would be different?  Distribution of property from an S-corp is deemed a sale at FMV.  Get an appraise to low ball the FMV, and pay your taxes.

[frank2236]

Thanks -  that's what I thought too - just hoping there is a way out of this