It's uncertain. You can possibly spin off the real estate under Code Section 355, but there is no published guidance on the subject. I have done this transaction with clients before who are aware of the uncertainty in the law and generally comfortable with the risk level.
I have an article that I published in a tax journal on this exact subject that I can send to you or anyone else interested -- e-mail me at
mer@frblaw.com if you'd like me to send it.
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Matthew E. Rappaport, Esq., LL.M.
Vice Managing Partner
Chair, Taxation Group
Falcon, Rappaport & Berkman PLLC
(516) 558-3377
mer@frblaw.com------------------------------
Original Message:
Sent: 09-25-2018 12:08
From: Gabriel Bentovim
Subject: S CORP DISTRIBUTION OF APPRECIATED ASSETS
I have a client in NYC that is a manufacturer and converter. The business operates as an S corp, In addition to the business the corporation owns the real estate where it operates. I was not involved with that set up as I was not the accountant at the time . I would like to separate the real estate from the business. I understand if they distribute the real estate to themselves or to an LLC that it will create a massive gain. My question is can they transfer the real estate to another S corp that is wholly owned by the same partners without a triggering a taxable event.
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Gabriel Bentovim
HOFFMAN & BENTOVIM, CPAs PC
Commack NY
631-499-1500
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