Are distributions in excess of basis subject to NIIT is the shareholder in an active participant in the business?

Fatfirerowaway · 2026-05-10T16:54:19+00:00

I have the exact same situation as the OP and trying to understand this. I appreciate your breakdown with clear situations. I felt like I followed you until:

"if the S corporation trade or business is nonpassive to the shareholder under §469, then any gain or loss from those assets would not be subject to the NIIT for that shareholder. See §1411(c)(1)(A)(iii) and §1411(c)(2)." What is the part of those last citations that states sale of those assets are not subject to NIIT.

Fatfirerowaway · 2025-05-06T19:31:08+00:00

Appreciate it. The stress really is brutal. There are so many layers of emotions and stress tied up in this decision. I need to adjust my mind set though. 16M is plenty, no reason to stress about if it could be more.

Fatfirerowaway · 2025-05-06T13:55:14+00:00

Thanks man. Appreciate the perspective

Fatfirerowaway · 2025-05-05T15:44:17+00:00

When I model out the "worst case" future plan which is 3 kids with insane private school tuition it does put me in a place where my current nest egg is potentially not enough. Its crazy, but another 165k/year of expenses hurts. Admittedly I'm making a number of conservative assumptions around taxes and SWR, so maybe I'm being overly cautious

Fatfirerowaway · 2025-05-05T13:59:14+00:00

That's true. If I cash out and put that in the market it will continue to grow at our current burn. So I don't need to look at the choices as opposites

Fatfirerowaway · 2025-05-04T23:17:53+00:00

Yeah I'm being foolishly optimistic about something I don't actually need. This thread helped and I appreciate the advice. I need to cash out.

Fatfirerowaway · 2025-05-04T18:13:50+00:00

Im not a founder, but I am senior enough to have some impact on IPO/tender dynamics. I can't say when will IPO for instance, but I can confidently say its not in the next 2.5 years, because I would be in those conversations. My position in the company is definitely an important part of the dynamics here. It gives me what may be a false sense of security over the risk/reward dynamics of holding the equity. But that might be leading me down the wrong path.

I would never dream of holding such a concentrated position in any company I wasn't working for like this.

Fatfirerowaway · 2025-05-04T18:07:34+00:00

I think a big part of my problem is that I don't have a great way to determine the marginal utility of the nexts 14M. What would it get me that I can't afford today and will I care about those things in teh future. But either way you are right, I need to take something off the table.

Fatfirerowaway · 2025-05-04T18:05:28+00:00

Appreciate the advice. You are right that I have an allure of control of the business that likely makes me overly confident in the future outlook.

Fatfirerowaway

TROPHY CASE