12/02/2025
For S corporations, the Built-In Gains (BIG) tax can be an expensive surprise.
When a C corporation elects S status, any appreciation earned before the conversion can still be taxed at the corporate level if those assets are sold within five years.
For ESOP-owned companies, that’s especially important—because even though ESOP income is tax-free, the BIG tax applies at the entity level.
The takeaway? Timing matters.
Don’t start your five-year clock until you’ve modeled all the scenarios with your CPA and ESOP advisors.
Read our latest post to understand how the BIG tax works, what triggers it, and how to plan your exit strategy with confidence.
Learn how the IRS built-in gains tax works for S corps, key triggers, strategies to mitigate exposure, and special considerations for ESOP companies.
