Transferring Property from and S-Corp

[Blaine Chapman]

Hello all,

This is my first post here on BP. I've been perusing for a bit and haven't found the exact answer I am looking for. 

Here is my situation:

I have a business in Georgia, registered as an S-Corp, and that S-Corp has a mortgage for the building and six acres it sits on. Two of the acres are developed, four of the acres are not. We would like to get the property out of the name of the S-Corp and into another entity that we still own but might have more protection. We will not be moving locations or selling the property to another party. Is there a way  for us to transfer the property from our S-Corp into another entity without triggering our due-on-sale clause and paying capital gains taxes as well. We will then develop the undeveloped four acres to lease out. I may be leaving out information, if so, please don't hesitate to ask. Thanks in advance.

Blaine

[Ashish Acharya]

Originally posted by @Blaine Chapman:

Hello all,

This is my first post here on BP. I've been perusing for a bit and haven't found the exact answer I am looking for. 

Here is my situation:

I have a business in Georgia, registered as an S-Corp, and that S-Corp has a mortgage for the building and six acres it sits on. Two of the acres are developed, four of the acres are not. We would like to get the property out of the name of the S-Corp and into another entity that we still own but might have more protection. We will not be moving locations or selling the property to another party. Is there a way  for us to transfer the property from our S-Corp into another entity without triggering our due-on-sale clause and paying capital gains taxes as well. We will then develop the undeveloped four acres to lease out. I may be leaving out information, if so, please don't hesitate to ask. Thanks in advance.

Blaine

Distributions of property (other than cash) generally are treated as though the corporation sold the property to the shareholder for its fair market value (FMV). The corporation recognizes gain to the extent the property's FMV exceeds its adjusted basis. If the property's adjusted basis exceeds its FMV, however, the loss generally is not recognized. So, putting real estate inside the corp is not a good deal.

Usually, with the real estate in the business, the same owners will put the real estate in the partnership/LLC and rent it out to the S-corp.