Discussion:C Corp liquidation - land only remaining asset

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Discussion Forum Index --> Tax Questions --> C Corp liquidation - land only remaining asset

Jwebb (talk|edits) said:

21 April 2007
New prospect -- has a C Corp and the only remaining asset is land. Basis is $50k, FMV $4 million. He's interested in selling but the taxes would give him a heart attack. So looking for tax mitigation strategies and wondering if who's got the idea out there. One thought was to exchange the property to another corp (or partnership - i.e. lp interest?) through a reorganization and get other corp stock/prtship interest in lieu of cash. Therefore his basis transfers to new stock. Then liquidate his interest as appropriate (not instantly - i.e. sham transaction). Would that convert all the gain to capital/personal?

Any other tax mitigating strategies for this scenario?

JR1 (talk|edits) said:

April 21, 2007
If he's old and married, assume he'll die first, make sure he has all the stock, and leave it in the corp for now. As the only asset, the value of the corp will step up to the fmv of the underlying land at his death and she's free to sell it for nuttin'. There's a guy who posts here from time to time on this topic, corptaxhelp I think is his handle...who might log in. Have no idea how he mitigates this, but usually has buyers that he claims will jump on these deals. I suspect for rather substantial discount obviously.

K38roger (talk|edits) said:

22 April 2007
nope on the exchange idea, I believe there's a seven year rule that trails the asset in the new entity and this new entity disposition will come back to the c-corp shareholder whether liquidated or not! no mention of liabilities or shareholder basis which would soften the impact, with defined benefit plan in place, sell the land offset the income with plan contribution, liquidate corp.

K38roger 11:53, 22 April 2007 (CDT)k38roger

Corptaxhelp (talk|edits) said:

April 23, 2007
JR1 is right... This is my specialty.

Your client needs to sell the corporation with the real estate still inside. Even at a tax-affected purchase price, your client will net a meaningful amount more with a stock sale. Plus, with a stock sale, there are no lingering liabilities going forward.

If your client does sell his assets, I'd recommend against doing a 1031. Capital gains rates are very low right now and will certainly go up before they go down. A 1031 would just defer the tax to a time when rates are potentially higher.

If you want me to look into your client's specific situation, please send me email. I'd be happy to look at the transaction and see if I can be of any help.

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