Built in Gains Tax

[Eli C.]

I am working on a property deal in which the owners seemingly converted from a C-corp in '03 to a S-corp, rolling the assets of the C-corp into the S-corp.

Since they did not pay taxes on the assets at the time of the conversion, it is my understanding that at the time of sale, it could be taxed at the corporate 35% rate. However, 10 years after the conversion, the built in gain tax goes away and they would only pay capital gains tax (15%).

Is there any change in the amount of the asset subject to the Built in Gains tax over the 10 year period. Since they are in year 9/10, is there something like only 10% of the asset is subject to the built in gains tax.