Using a Split-Interest to Get Land out of a C Corporation

If you have land "trapped" inside of a C corporation, you may be able to get it out tax-free using a split-interest transaction.

Photo by Benjamin Davies on Unsplash

Many farmers have land that is trapped inside of a C corporation. When I do my annual farm tax updates, I always try to find the youngest person in the class and ask them what the most famous song by the Eagles is? Most of the time they have no clue who the Eagles are and I then mentioned it is Hotel California (I know there are other songs just as famous).

In that song, you could check into Hotel California, but you could never leave. Land in a C corporation is similar. It is easy to “check” it into the corporation but it can be difficult to “check” it out without paying income tax on it. This is also true for land held by an S corporation.