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Tax Complexities in the Sales and Purchases of S Corps: Asset vs. Stock Sales, Installment Sales, Critical Elections

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, March 29, 2023

Recorded event now available

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This course will explain the significant factors purchasers and sellers should consider when acquiring or disposing of a Subchapter S corporation. Our panel of S corporation veterans will discuss the pros and cons of asset sales versus stock sales, qualifying for installment sales treatment as an S corporation, built-in gains tax, and the ultimate taxation of the shareholders.

Description

Purchasers generally prefer buying a business' assets. This allows the acquirer to depreciate the newly acquired assets at fair market value and often write off a significant portion of the purchase price using bonus depreciation or Section 179 deductions. Sellers, on the other hand, prefer selling their stock. These gains often qualify for capital gains rates and, for eligible S corporations, may qualify for installment sale treatment. Even sales that are legally treated as stock sales could be treated as asset sales for tax purposes if an election under 338(g) or 338(h)(10) is properly made.

For S corporations that were previously C corporations, sellers must consider the tax effect of built-in gains. Even though S corporations are used to avoid two layers of tax, distributing appreciated assets and assets that have depreciated have significant tax consequences. Tax practitioners working with Subchapter S corporations need to understand the options available to shareholders purchasing and disposing of these flow-through entities.

Listen as our panel of flow-through entity experts examines specific scenarios regarding purchases and sales of S corporations and provides explanations of the tax consequences of each.

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Outline

  1. S corporations
    1. Asset purchases and sales
    2. Stock purchases and sales
    3. Installment sales
    4. Built-in gains
    5. Elections
      1. Section 338(g) and 338(h)(10)
      2. Section 336(e)
    6. The Type F reorganization
      1. Converting S corporation to QSub
      2. Converting QSub to SMLLC

Benefits

The panel will cover these and other critical issues:

  • Avoiding built-in gains tax on sales
  • When an election under 338(h)(10) would result in significant tax savings
  • Which S corporation sales are eligible for installment sale treatment
  • How shareholders are taxed on dispositions

Faculty

Jamison, Robert
Professor Robert W. Jamison, CPA
Professor Emeritus of Accounting
Indiana University

Mr. Jamison is Professor Emeritus of Accounting at Indiana University, Purdue University, Indianapolis (IUPUI). His...  |  Read More

Walsh, Kevin J.
Kevin J. Walsh, CPA, CGMA
Director/Vice-President
Walsh, Kelliher & Sharp, CPAs

Mr. Walsh special interest is in advising the owners of closely-held businesses. This interest has led to experience...  |  Read More

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