From 1986 until very recently, a C corporation that converted to an S corporation faced potential double taxation on built-in gain assets (“BIG assets”) for a 10 year period following its S election. The full benefit of electing S corporation status and pass-through taxation was only available after the 10 year period.

In 2009, legislation was enacted reducing the built-in gain period to seven years for BIG assets sold in 2009 and 2010. In the recently enacted Small Business Jobs Act of 2010, this period was reduced to five years for BIG assets sold in 2011.