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  1. #1
    Join Date
    Jul 2007
    Posts
    1

    Default Undoing a Corporation to Avoid Capital Gains Taxes

    My parents -farmers- formed a corporation 40 years ago in Kansas. They placed the farm land in the corporation. Mom now owns the all the shares of the corporation. My understanding is that the corporation basis for the land is the original cost, which will result in large capital gains taxes if the corporation sells the property. Can she dissolve the corporation, placing the land back in her name so it will receive a stepped up basis at her death? Will dissolving the corporation result in unwanted taxes, or other pitfalls?

    Thank you.

  2. #2
    Join Date
    Jul 2006
    Posts
    5,437

    Default Re: undo corporation

    I don't think the feds will fall for that; but stand by for more tax advice.

    Also, hire a tax cpa to help you here...it will be worth your money.

  3. #3
    Join Date
    Jul 2007
    Location
    Florida
    Posts
    2,344

    Default Re: undo corporation

    The asset is worth what it is worth, and if you inherit shares in the corporation or the land itself you will still receive stepped up basis in either asset. The fair market value of the asset as of date of death is your basis, and if the asset is stock in the corporation presumably it is worth what the land is worth.

    If your mother dissolves the corporation and transfers the land back to herself it will very likely be a taxable event. Either a tax CPA or an Enrolled Agent can give you specific tax advice, but don't do anything until you consult one of the two.

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