Converting an S-Corp to a C-Corp to make it QSBS compliant

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by a searcher from Claremont McKenna College
in San Francisco Bay Area, CA, USA

5yrs ago

Converting an S-Corp to a C-Corp to make it QSBS compliant

assuming the criteria are met, seems like the conversion of a S-Corp to a C-Corp can be made to be compliant with QSBS, Sectionredactedi.e. avoid paying federal capital gain tax up to $10 M per investor, if stock held 5+ years)?

has anyone done a conversion, or any CPA who can comment? looks like the QSBS-compliant stock must be issued by the company (not acquired from a shareholder).

redacted

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reply by a searcher 5yrs ago
from Claremont McKenna College in San Francisco Bay Area, CA, USA

Thanks for these notes (nice to see ^redacted‌ accomplish that). I'm seeking to personally acquire an S-Corp (stock purchase), then convert to it to a C-Corp and have C-Corp issue QSBS-compliant stock (recap) to my family and new investors. Wondering if I will need a formal valuation/letter (from a CPA) at the time of issuance of the QSBS-compliant stock (to establish the cost basis)?

reply by a professional 5yrs ago
from Walsh College of Accountancy and Business Administration in Detroit, MI, USA

Andy, your going to want to follow Anthony's steps so that you too can have QSBS on the stock you own.

You do not need a formal valuation, but I highly recommend your CPA summarize the section 1202 rules and apply it to the facts and save all of the supporting data. No one likes to go back looking for it when you sell 5+ years from now. This process will also help you understand what you can and cannot do after formation and before an exit. There are some traps.