An S Corporation held in Florida holds land (taxed as Farm Land) in North Carolina. Originally a C Corp, the S Corp was formed for better tax purposes. I understand that to avoid capital gains, the S Corp would have to wait 10 years to sell any of the land. Unfortunately, this did not happen.

The 3 owners of the S Corporation deeded themselves lots within the farm land (around 5 acres each at fair price of $25,000/acre).

Their CPA who is also located in Florida, says they will owe $80,000 in capital gains tax from the corporation and around $10,000 each from personal income tax.

What I want to know is, are there any ways to lessen or avoid these capital gains taxes. (The farm does not operate at any loss, it is merely a vacation spot that rents land to a farmer).

Can they buy real estate to avoid some of these taxes just as an individual can to avoid capital gains? Can they form a business under the corporation which would spend money in the first years for start up costs but not see a profit?

Any ideas?

Thanks - Jennifer