Land sale in a closely held C-Corp

[LENNYMANNING]

C-Corp's only asset is a vacant lot. Share holders are divided betweem individuals and Family Trust LLPs. 1958 NY C-Corp started 3 generations ago. Just held the land. No LLC or S-Corps then and no one bothered to get out of the C-Corp. Now a buyer comes along and offers $3M for the land. Buyer will do a stock purchase at $2.5M but family doesn't want that. They want to do the sale at the $3M and go into a 1031 Exchange. Except a 19% stockholder wants to cash out and retire. Since you need 100% of stockholder approval for the 1031 we are at an impasse. Basis is $100K and between C-Corp taxes (IRS,NYS,NYC) and dividend distrubution there will be a combined tax of over 60%. I am brainstorming and always can use more brain power. None of the stockholders have the funds to buy the 19%er out personally. Plus family dynamics make it impossible to get the shasreholders all in one room together. Thank you.

[Abby Normal]

Installment sale if they are cash basis?

[kcjenkins]

Nothing you can do about dumb/stubborn clients except use the Planner to print out the results from each option, then let them fight it out among themselves.  Putting it on paper sometimes works.  If not, at least you did your job, by giving them the facts.

[Richcpaman]

Have the existing partners buy out the Stubborn partner beforehand, and then do your property sale and then 1031.

Rich

 

[jim@lwr]

The corporation, not the shareholders, will be the exchanger in the 1031 transaction.  Do the bylaws require 100% shareholder approval?

After the exchange, then what?  You still have a C corporation owning low basis real estate.  With LLPs as shareholders does the corporation even qualify for an S election?

Since there is no corporate level capital gains rate, the option to sell stock at $2.5 might seem more attractive.