Congress enacted section 1374 in order to eliminate companies from electing S corp status soon before an asset distribution or sale, simply to avoid double taxation. Under Section 1374, a special corporate level tax (the built-in gains, or BIG, tax) is levied on gains recognized by an S-corporation for ten years following the Selection that accrued while it was a C corporation. The tax applies to sales of all property, including individual assets, or the entire company.
Accordingly, in tandem with electing to be taxed as a subchapter S-corporation, companies often obtain a valuation, either of the enterprise as a whole or the values of the individual underlying assets.
MPI is experienced in both enterprise and individual corporate asset valuations. Please consult your tax advisor and contact MPI to assist you with your valuation needs.
