What are the transfer tax consequences for one single owner of a small family business (C-corp) to change the company to an S-Corp, changing the ownership to 50% of his two children?
It used to be that you couldn't convert a C corp to an S (but you could go the other way) and I don't know if the IRS regs have been changed. From what you said you may be thinking of forming what is called a Family Corporation.
What you have here is a tricky estate issue that may be solved best by other vehicles like trusts. The issue is how to pass assets down to the next generation with minimal tax hits. Achieving this will take an estate expert who can evaluate the specific situation and then propose the most effective way of doing it. A lot depends on the size of the assets and the timing.
The wrong thing to do is get in a situation where there is a large current tax liability and no cash to pay it. Good luck, the IRS is not what you would call warm and fuzzy! |
