My Family has an S-Corp with 30 acres of land worth $300,000 and sold 1.5 acres for $15,000. No cash is being distributed to shareholders. Is any tax due on the sale?

[devon-vereen42-g]

My family has an S-Corp. It is real estate holdings consisting of approximately 30 acres and worth $300000 tax value. The business operates at a lost each year and does not make any money, however this year we sold 1.5 acres for $15,000 or the tax value of the property and we are NOT distributing money to shareholders. We simply converted the 1.5 acres to cash ($15,000)and the value of the property is equal to the same except that we are less 1.5 acres and we have cash instead of the acreage. We want to confirm that no taxes are due on the sale to shareholders since we are NOT distributing the cash.

[Anonymous_ · Accepted solution]

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@devon-vereen42-g wrote:
We want to confirm that no taxes are due on the sale to shareholders since we are NOT distributing the cash.

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It makes no difference whether or not cash is being distributed to shareholders.

The only issue is whether or not there is a gain on the sale of the land (1.5 acres), that was sold. If there was a gain, each shareholder will be issued a K-1 and will report their share of that gain on their individual income tax returns.

[devon-vereen42-g]

No gain. Same value as before the sale.

[Anonymous_]

If the basis is the same as the sales price (less selling expenses), then the sale simply needs to be reported by the S corporation on its 1120-S, but there will clearly be no tax liability on the sale to the shareholders.

[devon-vereen42-g]

Okay and thanks!

[devon-vereen42-g]

Okay and thanks.