The "Big Tax" for S corporation conversions
The built-in gains (BIG) tax, which can be quite onerous, equals the highest corporate tax rate (currently 35 percent). If your firm is liable, the tax is paid at the corporate level and the gain is taxable again at the shareholder level.
The net built-in gain subject to tax during a year is limited to your firm’s taxable income for the year. You carry forward any excess to the next year.