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  • 1.  S CORP DISTRIBUTION OF APPRECIATED ASSETS

    Silver Most Valuable Member
    Posted 09-25-2018 12:08 PM
    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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  • 2.  RE: S CORP DISTRIBUTION OF APPRECIATED ASSETS

    Posted 09-26-2018 09:33 AM
    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
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  • 3.  RE: S CORP DISTRIBUTION OF APPRECIATED ASSETS

    Platinum Most Valuable Member
    Posted 09-26-2018 09:38 AM
    Could that article be posted to NCCPAP website for all to read?

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    Michael Jaffe
    CPA
    MICHAEL B. JAFFE, CPA PC
    Commack NY
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  • 4.  RE: S CORP DISTRIBUTION OF APPRECIATED ASSETS

    Posted 09-27-2018 10:36 PM
    Very much appreciate the thought, Michael, but the publisher (The Journal of Taxation of Investments) expressly forbids me from doing that by agreement.

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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
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The opinions expressed are the views of the author alone and should not be attributed to any other individual or entity and shall not constitute an accounting opinion.