ViB
04-25-2007, 12:04 PM
I need help with a client capital gains/tax problem on a commercial property. So for all you real estate, tax, and legal property guruÂ’s in here, if you have a solution or know somebody who may, I would appreciate a referral.
HereÂ’s the situation: A client has a commercial property that was purchased and held in a C-corp. The client converted to an S-corp. They wish to sell the property. However, there is an IRS rule that mandates a 35% penalty PLUS the 15% capital gains rate for a total 50% tax on the sale if the property is not held for 10 years past the S corp conversion. Obviously the client does not want to sell and lose 50% in tax.
Has anyone experienced a similar situation, and if so, how did you solve it? Would a stock swap still be considered a constructive sale? Can this be solved using a trust? Any help would be appreciated!
Thank you,
Stuart
HereÂ’s the situation: A client has a commercial property that was purchased and held in a C-corp. The client converted to an S-corp. They wish to sell the property. However, there is an IRS rule that mandates a 35% penalty PLUS the 15% capital gains rate for a total 50% tax on the sale if the property is not held for 10 years past the S corp conversion. Obviously the client does not want to sell and lose 50% in tax.
Has anyone experienced a similar situation, and if so, how did you solve it? Would a stock swap still be considered a constructive sale? Can this be solved using a trust? Any help would be appreciated!
Thank you,
Stuart