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C-corp and sale of real estate

99mtamchamp
Level 2

Looking for a tax strategy for a C Corp. Not sure there’s any. I have an elderly couple that have owned land for 100 years in their family and it’s held in a C Corp. They are looking to sell some of it since the real estate market is so high. But I’m just looking for any kind of strategies regarding avoiding the double taxation. I know there’s built-in gains regarding S Corp. elections and I’m not really familiar how those work regarding this type of transaction. I would consider s election for this entity if it would be helpful alleviating the double taxation regarding the sale of real estate within the c corp

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9 Replies 9
IRonMaN
Level 15

At this point there isn't any strategy other than pay the tax.

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)
abctax55
Level 15

Make the election, and hope your elderly clients live long enough.  It used to be 10 years, then it dropped  - but without looking it up I don't know what the current time frame is.  

Former Chump..oops..AllStar...I used to be a people person, then people ruined it


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qbteachmt
Level 15

"I would consider s election for this entity if it would be helpful"

OMG, no. Not when the operation is Real Estate.

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abctax55
Level 15

Michele - since the RE is already in a Corp (yes, bad) an option is to make the S-election & wait it out to avoid B.I.G.  Then the double taxation is mitigated.  Timing is the issue with elderly clients.

Former Chump..oops..AllStar...I used to be a people person, then people ruined it


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BobKamman
Level 14

Are they 100% owners of the corporation?  What other assets does it own?  What is their basis in the corporation stock?  Liquidation would avoid double taxation.  

qbteachmt
Level 15

This is exactly what I was thinking: "Liquidation would avoid double taxation."

At this point, why not do this?

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"Level Up" is a gaming function, not a real life function.
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sjrcpa
Level 15

What's the couple's tax bracket? Maybe they can receive dividends from the corporation taxed at -0-%.


ex-AllStar
sjrcpa
Level 15

"They are looking to sell some of it '

So liquidation with distribution of remaining land as a deemed sale at FMV does not seem attractive. Might not be enough cash to pay the tax.

Also, S Corp election is not attractive since they want to sell some of the land now which would trigger BIG tax.

I think Jeff (IRonMaN) has it right.


ex-AllStar
Taxes-by-Rocky
Level 5

100 years?  Suspect the generation before your client had the same problem.

Short of a new mortgage to pay dividends (i.e., monetize the illiquid asset - or shares - and, perhaps, exacerbate the problem further for the next generation) it might be best to try to improve upon the basis of the shares by looking at options with the first (most likely) to die and/or a death bed marital gift of the stock?  [Not exactly ideal estate planning but it may depend on the life expectancy of the survivor, the exemptions in place at the time for the first to die, state death taxes etc.]  At least you might get a more palatable corporate liquidation or sale of shares out of it.

BIG tax wait period was 5 years last I looked but it seems to change by the day.  Also assuming election survives estate transfer but not sure on that one.....you definitely need to spend some time looking.