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S Corporation Built-In Gains Tax Calculator (Section 1374)

Is this entity in good shape, or are there warning signs?

Net recognized built-in gain after the taxable income and NUBIG limits, the C corporation NOL offset and the 21 percent tax.

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Your figures
Example figuresIllustrative only. Type over them with your own.
Built-in gains tax
$54,600
21 percent of net recognized built-in gain after limits
Net recognized built-in gain
$300,000
Lowest of net recognized gain, taxable income and remaining NUBIG
Taxed after C corporation carryforwards
$260,000
Drawn to one scale
Built-in gains tax$54,600
Net recognized built-in gain$300,000
Taxed after C corporation carryforwards$260,000
NUBIG left for later years$500,000
Gain carried to next year (taxable income limit)$50,000
All results
MeasureResult
Built-in gains tax$54,600
Net recognized built-in gain
Lowest of net recognized gain, taxable income and remaining NUBIG
$300,000
Taxed after C corporation carryforwards$260,000
NUBIG left for later years$500,000
Gain carried to next year (taxable income limit)
Section 1374(d)(2)(B): treated as recognized built-in gain next year
$50,000
How this was worked out
Work shownrecomputed as you type
Net recognized built-in gain = lowest of (recognized gains - recognized losses), taxable income as a C corporation, and NUBIG - gains taxed in earlier years
Taxed amount = net recognized built-in gain - C corporation NOL and capital loss carryforwards
Tax = 21% x taxed amount

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • Net recognized built-in gain = lowest of (recognized gains - recognized losses), taxable income as a C corporation, and NUBIG - gains taxed in earlier years
  • Taxed amount = net recognized built-in gain - C corporation NOL and capital loss carryforwards
  • Tax = 21% x taxed amount

How it works

Section 1374 taxes an S corporation that was a C corporation, or took assets from one, on built-in gain recognized during the recognition period of 5 years starting with the first day of the first S year. The rate is the highest corporate rate in section 11(b), which is 21 percent.

The taxed amount cannot exceed the taxable income the corporation would have as a C corporation, and total gain across the period cannot exceed the net unrealized built-in gain measured at conversion. When the taxable income limit is the lowest of the three, the excess is treated as recognized built-in gain in the next year (section 1374(d)(2)(B)). C corporation NOL and capital loss carryforwards offset the gain under section 1374(b)(2). Business credits, state taxes and the shareholder level tax on the same gain are not modeled.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

How long is the recognition period?

Five years beginning with the first day of the first taxable year as an S corporation.

Which rate applies?

The highest rate in section 11(b), which is 21 percent.

What caps the total gain taxed?

Gain across the recognition period cannot exceed the net unrealized built-in gain, less gains taxed in earlier years of the period.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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