Have a 2 member Sub S corp located in Iowa Sub S has been in existence for 12 yearsOriginal C corporation set up about 1990Value of land $1Million dollarsOne member died 2011the estate of the member who died wants the stock and 1/2 of the value of the farm land of the deceased member to be distributed to the estatequestions tax consquence of distributing stiock/farm land to the deceased membertax consquences of the remaining Sub S member XXXXX XXXXX
State/Country relating to question: Iowa
research has revealed no useful information
When property is distributed from a Corporation, C, S or Sub-S, it is considered a deemed sale. The corp would recognize the sale at fair market value.
The property in question would be the Land.
Could you clarify your question about distributing stock, the stock in the Sub S corp ?
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If you mean by distributing the S-Corp stock, do you mean buying out deceased shareholder (paying the estate) or that the estate would become the new shareholder in S-corp.
18 years experience as an Enrolled Agent, insurance agent, stock broker and financial advisor.
Thank you foir your assistance
while it is now clear for me that there will be a gain to report on the appreciated property
is the gain reduced by the stock which was held by the deceased inside the sub-s or will the estate take into account the gain to be reported when preparing either a form 706 or form 1041
Does the S-corp hold stock as an investment? or do you mean the deceased held stock of the S-corp.The gain on the distribution of the property would be based on the ownership of the S-Corp, the deceased (his estate) would get his prorated share of the gain.With the property being distributed and treated as a sale, the overall value of the Company would be reduced by the reduction in assets (property). This would lower the value of the S-corp stock.Please clarify, S-corp stock or stock investment owned inside S-Corp.