If your Accountant or someone else tells you to take title to Real Estate in an S-Corporation, don’t listen. Run the other way! There are many adverse tax consequences if you own Real Estate in an S-Corporation. Many are detailed in the tables below. Two of these adverse income tax consequences is that live or die, it’s a great gift to the IRS. If you die owning Real Estate in an S-Corp, your heirs will inherit your unrealized capital gain when they sell the Real Estate. When you own Real Estate in an S-Corp you forfeit the “step up in basis” that your heirs would enjoy if you had owned the Real Estate outright, or in a partnership, or an LLC. “Step up in basis” is the Federal Income Tax Benefit that excuses your heirs from the obligation to pay tax on the unrealized appreciation of property they inherit. If you sell the Real Estate in the S-Corp while you are alive, you incur capital gains tax within the S-Corp, and then are taxed again when you distribute the sales proceeds out of the S-Corp. Yes, here’s a situation where your pay “double tax” even though you were told that the S-Corp is a “flow through entity”. On the other hand, neither of these adverse income tax consequences arises if you own the Real Estate outright, in a partnership, or in an LLC (taxed as a disregarded entity or partnership). The tables below give you more details about the comparison of owning Real Estate in an S-Corp compared with an LLC. Real Estate: S-Corp v LLC 2025-10-30
Business Entities , Corporations , Income Tax , Limited Liability Companies , Partnerships , S-Corps
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If your Accountant or someone else tells you to take title to Real Estate in an S-Corporation, don’t listen. Run the other way! There are many adverse tax consequences if you own Real Estate in an S-Corporation. Many are detailed in the tables below. Two of these adverse income tax consequences is that live or die, it’s a great gift to the IRS. If you die owning Real Estate in an S-Corp, your heirs will inherit your unrealized capital gain when they sell the Real Estate. When you own Real Estate in an S-Corp you forfeit the “step up in basis” that your heirs would enjoy if you had owned the Real Estate outright, or in a partnership, or an LLC. “Step up in basis” is the Federal Income Tax Benefit that excuses your heirs from the obligation to pay tax on the unrealized appreciation of property they inherit. If you sell the Real Estate in the S-Corp while you are alive, you incur capital gains tax within the S-Corp, and then are taxed again when you distribute the sales proceeds out of the S-Corp. Yes, here’s a situation where your pay “double tax” even though you were told that the S-Corp is a “flow through entity”. On the other hand, neither of these adverse income tax consequences arises if you own the Real Estate outright, in a partnership, or in an LLC (taxed as a disregarded entity or partnership). The tables below give you more details about the comparison of owning Real Estate in an S-Corp compared with an LLC. Real Estate: S-Corp v LLC 2025-10-30
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Business Entities , Corporations , Income Tax , Limited Liability Companies , Partnerships , S-Corps
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