Sale of Land in an S Corp

New Orleans, Louisiana
Tax, SDIRAs & Cost Segregation
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Sale of Land in an S Corp

MJ Sauer
Member since 2019 · 1 post · 0 votes

I am selling a lot that I bought about $7,000 in 2013. The sales price is $110,000. The lot is owned within one of my businesses which is an LLC with an S-Corp tax election. I think this might have been a mistake to place it in this S-corp business but can anyone tell me how the gain from the sale will be treated within the S-Corp. I may do a 1031 exchange but the capital gains rates are low right now and I can most likely make money with some of the cash and use some for some capital improvement projects as I am mainly mortgage free at this point.

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  • Ash Hegde
    Lender · Fort Lauderdale, FL (Lending in FL CT GA MI PA) · Member since 2022 · 470 posts · 349 votes
    3y

    AFAIK that transaction would show up as a long term capital gain on your S-Corp K-1 and be taxed at the capital gains rates. 

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  • Account Closed
    Accountant · San Angelo, TX · Member since 2021 · 48 posts · 80 votes
    3y

    The sale of this piece of land will pass through to shareholders via their K-1s. If you're the only shareholder, the gain will all pass through to you. You'll get to reduce the gain by your selling expenses, basis of the land, and any additions to basis throughout the time you owned it. Then it will be taxed at long term capital gains rates since you owned it 10 years.

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
    3y
    Quote from @MJ Sauer:

    I am selling a lot that I bought about $7,000 in 2013. The sales price is $110,000. The lot is owned within one of my businesses which is an LLC with an S-Corp tax election. I think this might have been a mistake to place it in this S-corp business but can anyone tell me how the gain from the sale will be treated within the S-Corp. I may do a 1031 exchange but the capital gains rates are low right now and I can most likely make money with some of the cash and use some for some capital improvement projects as I am mainly mortgage free at this point.


    The income that is not subject to SE taxes might be subject to SE taxes via payroll requirement if you run this transaction in your S-corp. Please discuss this and your future transactions with your tax advisor ASAP. 

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