USA Converting to an S-corp

Joined
Aug 8, 2023
Messages
2
Reaction score
0
Country
United States
I have a client who is a C-corp. He is selling all the assets in the business but is holding a note for part of the proceeds to be collected over the next two years. Can I elect to be an S-corp and next year so the proceeds he collects aren't subject to dividends tax when he takes the money out of the business?
 

BIG E

VIP Member
Joined
Dec 19, 2020
Messages
299
Reaction score
41
Country
United States
The proceeds he collects from the note are part taxable interest and part long term capital gain, that will both be reported as taxable income to him regardless of which type of corporation he is, so he's not "saving" anything by not having to report dividends.
And if he converts to an S corp - then the gain in the S corp will be SHORT TERM gain, not long term.
I hope you will report the sale of the assets on Form 8594.
And there are rules to adhere to to properly convert from C to S including Built-In Gains Tax.
 
Last edited:
Joined
Aug 8, 2023
Messages
2
Reaction score
0
Country
United States
The proceeds he collects from the note are part taxable interest and part long term capital gain, that will both be reported as taxable income to him regardless of which type of corporation he is, so he's not "saving" anything by not having to report dividends.
And if he converts to an S corp - then the gain in the S corp will be SHORT TERM gain, not long term.
I hope you will report the sale of the assets on Form 8594.
And there are rules to adhere to to properly convert from C to S including Built-In Gains Tax.
Thank you for your reply. I realize that there are taxes (interest and long-term gain) from the installment sale. But, if he takes the money he receives out of the c-corp he will be double taxed because they will be considered a dividend to him. My question is If I convert to an S-corp will these distributions be considered a dividend that is taxable?
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Members online

No members online now.

Forum statistics

Threads
11,646
Messages
27,602
Members
21,421
Latest member
termux

Latest Threads

Top