John A. Sikora

Taxable gains from the sale or other disposition of property by S corporations are typically taxed only to the shareholders.  However, if the property was held by the corporation when it converted from C corporation to S corporation status (or was acquired by such a converted S corporation in a nontaxable transaction), then part or all of the gain from the sale or disposition may also be subject to taxation at the S corporation level.   This corporate-level tax, commonly referred to as the built-in gains tax (or “BIG tax”), is imposed at the highest marginal C corporation tax rate.