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S-Corp Net Unrealized Built in Gain calculation

We created a C-Corp in 2015 and have elected to file as an S-Corp for 2019. How do we calculate the net unrealized built in gain? The company has no assets but had a small corporate income in 2015 and in 2018. Is the unrealized built in gain the total amount of the corporate income for the past 5 years? Thank you. 

3 Replies
Level 5

S-Corp Net Unrealized Built in Gain calculation

you need a tax to calculate 



Level 12

S-Corp Net Unrealized Built in Gain calculation

I believe the link provided by @soultax09 has an error.

The article states that there will be built-in gains (BIG) tax when the adjusted basis of the assets exceeds the FMV; which is actually backwards.

I would also recommend that you consult with a tax professional as there are issues that need addressed and you need to understand how and when the BIG tax comes into play:

  • Are you cash basis?  If so, this has implications.
  • Do you have an overall BIG?
  • If you do have an overall BIG then you need to understand when and if you will need to pay any tax.  There are taxable income limitations, etc.

Your facts are brief, however, in reading what you provided, you may also have C corp earnings and profits which will need to be tracked and reported on the form 1120S.  This comes into play if you have distributions that exceed AAA (accumulated adjustment account) as an S corporation.

*A reminder that posts in a forum such as this do not constitute tax advice.*
Not applicable

S-Corp Net Unrealized Built in Gain calculation

I would also advise using a pro. but if you want read IRC section 1374 and the related regs which deal with BIG.  


I would say that if the only asset the C-Corp had was cash  then there will be no BIG tax.  However, many corporations use the cash method of accounting where they have unrecognized receivables because they haven't yet been collected and  "inventories" that are not reflected on the books.   these will give rise to the BIG tax.   fully depreciated property and equipment if worth more then there nominal $0 book value can also give rise to big tax.  

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