[skiw97]

ACE – does anyone care to put this in English for me?

Next, S corp exemption from tax on built in gains – the rules/exemptions per my becker notecard followed by my question… –

1. the sale or transfer does not occur with 10 years of the first day of first year that S corp election is made. It just went form C corp to S corp – so how could it wait 10 years, the transfer occurred when the election was made, just like the transfer of the all the other financial statement accounts.

2. S corp was never a C corp. um, its only a built in gain if it was transferred from a C corp.. so how could it not have been a C corp?

3. S corp can demonstrate that the distributed asset was acquired after the S election. If it was bought after the S election, why would it even be a concern for a built in gain?

could be too late at night.. could be reading into it too much, in general the built in gain concepts seem straightforward in the questions, this notecard just confused me.

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FAR 11/13 - 78, BEC 1/13 - 82, AUD 2/23 - 94, REG 5/15 - 86

[NY GT girl]

ACE – a component of AMT that was added to arrive at economic income. You then use the ACE number to get your ACE adjustment [.75(pre-adjustment AMTI – ACE]. The treatment from there depends on if its positive or negative. If its negative, you can't take it unless you had positive ACE in the past. i would be surprised if you are tested on this.

S Corp Built-in Gains Tax applies to an S Corp that OPERATED as a C Corp, not just elected S Status right as soon as it was incorporated.

They S Corp has to (is supposed to) keep track of the FMV of the assets at the date it became an S Corp since the gains are treated differently in the 2 entities. If you hold the asset for >10yrs after you elect S, you aren't subject to the built-in gains tax on those assets. If you do sell within 10 years, the appreciation during C Corp years is subject to the built-in gains tax.

3. S corp can demonstrate that the distributed asset was acquired after the S election. If it was bought after the S election, why would it even be a concern for a built in gain?

This means if the GAIN on the distributed asset was from after the S election. If you had an appraiser come in at the date of S election and value an asset with an AB of 10, FMV @ S Corp election of 15 and you sell it later for 30, the only amount subject to the Built-in gains tax is 15-10=5.

Anything acquire after the S-election was made is not subject to the built-in gains tax.

Hope this helps.

NY Candidate using Becker: FAR (2/20) - 81, AUD (4/3) - 92, REG (5/3) - 95, BEC (5/29) - 89 DONE!!!

[skiw97]

NY TAX coming thru! thanks!

FAR 11/13 - 78, BEC 1/13 - 82, AUD 2/23 - 94, REG 5/15 - 86

[NY GT girl]

that masters degree in tax is finally paying off. haha

NY Candidate using Becker: FAR (2/20) - 81, AUD (4/3) - 92, REG (5/3) - 95, BEC (5/29) - 89 DONE!!!

[KCJayhawker]

Personally, I'll just pass on learning ACE for the REG exam. At most it's one question. Not worth the time.

[jeff]

I agree with KC…know the basics, but don't study this topic to an in-depth degree.

[Author]

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