### Question
What is the definition of net unrealized built-in gain?


### Answer
The definition of **net unrealized built-in gain** is as follows in *26 U.S.C. § 1374*:

> the amount (if any) by which—



(A) the fair market value of the assets of the S corporation as of the beginning of its 1st taxable year for which an election under section 1362(a) is in effect, exceeds



(B) the aggregate adjusted bases of such assets at such time

#### Citation:
  - *26 U.S.C. § 1374*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter S-Tax Treatment of S Corporations and Their Shareholders > PART III-SPECIAL RULES**

