Built-in Gains Tax:Avoiding Unpleasant Surprises - Holbrook & Manter

Built-in Gains Tax:Avoiding Unpleasant Surprises - Holbrook & Manter

When a business is converted from a C corporation to an S corporation, its owners sometimes encounter an unexpected—and unwelcome—tax liability in subsequent years. Often referred to by its unfortunate acronym, the “built-in gains” (BIG) tax can catch recently converted S corporation shareholders by surprise. Adding to the surprise, the liability associated with the BIG tax liability can be substantial, and is paid in addition to any tax paid by…