Built-in gains tax for S Corp that was a C Corp

[fdwight1]

Built-in gains tax.  When it was a C corp, a parcel of land was purchased for $25000 in 1983.  The C corp was converted to an S Corp in 1987.  The parcel of land was sold in 2018 for $65000.  Since the holding period is greater than 10 years, does the S Corp have to pay built-in gains tax?  Also the $25000 purchase price was taken from C Corp profits, but never claimed for tax purposes, so this has to be regular income.  I am using TT 2017 to estimate my 2018 taxes as a what-if case.

[Khai · Accepted solution]

No. Since the land was held for more than 10 years as an S Corporation, then the S Corporation will not be subject to the Built-in gains tax due to having exceeded the recognition period.

For more information please see the IRS Instructions on Built-in gains