S corporation vs Personal Holding Company
I have a client who is the sole shareholder of C corportaion. The corporation has not had much activity and few assets. The owner wants to transfer some stock into the corporation that he ownes from another corporation. My client thinks that this will afford him another level of protection on the stcok he owns. I told him to review that with his attorney. I also told him that this could create a personal holding company issue. He asked if he could make an S election and then transfer in the stock. My research tells me that an S corporation does not create a personal holding company issue. Since the assets are few I don't think we will have a build in gains tax either. Are there any downs sides to electing S and then transfering in the stock?
