Discussion:Sch L Entries for LLC to S-Corp Change
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Discussion Forum Index --> Basic Tax Questions --> Sch L Entries for LLC to S-Corp Change
Discussion Forum Index --> Tax Questions --> Sch L Entries for LLC to S-Corp Change
| 1 July 2008 | |
| I have a client who is organized as a Colorado LLC and has filed as an LLC on Form 1065 for a few years. They want to file as an S-Corp, effective 1/1/08. I plan on filing a late S-Election (Rev Proc 2004-48 or Rev Proc 2007-62(-64?).
I believe this is a tax free event. What is my final Form 1065, Sch L, End of tax year column suppose to look like? Zeroed out or balances immediately prior to the change in classification? If zeroed out, is everything "distributed"? What about outstanding liabilities (that aren't forgiven or paid off...just continuing on)? | |
| July 1, 2008 | |
| The only thing that changes is the equity section. From Capital, Parnter to Add'l Paid in Capital. | |
| 1 July 2008 | |
| I understand that the S-Corp (Form 1120-S) Schedule L will be APIC vs. Partner's Capital...what I'm not clear on is the Sch L presentation on the final Form 1065. Please see my questions in the 2nd paragraph above. Since you said nothing changes except Equity section (assuming 1120-S), should I take that to mean completely fill out EOY Sch L (Form 1065) with balances prior to changing to S-Corp filing?
Thank you in advance for responding! | |
| July 1, 2008 | |
| Yeah, nothing else changes. I meant that, really....seriously. ok? | |
| 1 July 2008 | |
| I've read many posts on this forum about LLCs electing S Corp tax treatment, but I can't figure out for the life of me why someone would want to do that. Can someone enlighten me? | |
| July 2, 2008 | |
| This one sounds like he's actually doing a 351 and becoming a real Corp. Kudos. It would be done because corp tax law is still more sure than LLC law. Perhaps something in the state law that's driving it. He might not know about bifurcation of interests yet. | |
| 2 July 2008 | |
| By the way, you need to check into the method and timing of filing for S Corp status. I had an LLC that elected to be taxed as a C Corp with a November YE. The due date for the 1120 was 2/15. There were still issues at the due date, so I filed an extension. I figured that I still had time to file the 8832. Not so, said the IRS (I talked to the person who wrote the Reg). The deadline for automatic electionwas the due date of the return, not including extensions. The client now has to ask for a PLR to get that treatment. | |
RoyDaleOne (talk|edits) said: | 2 July 2008 |
| You need this:
https://www.taxschool.uiuc.edu/products.html#LLC Way too much to post all the ins and outs. | |
RoyDaleOne (talk|edits) said: | 2 July 2008 |
| The ending Schedule L should be zeroed out.
The assets and liabilities are transferred to the S Corp. You still need the book. | |
| 3 July 2008 | |
| I believe this client's balance sheet is too simple to delay finalizing the return until I can obtain approval for, purchase and receive the above book. Sounds like the book may still be worth while for future reference for more complicated situations. Thank you for the recommendation.
My client has cash, one fully depreciated asset, two current liabilities (payroll and unearned income) and Capital. Maybe I'm looking at this too simplistically, but if Sch L should be zeroed out, can I not just zero out each account (with closing AJE) on the 1065 (at no gain/loss) and then re-create the same six accounts (with opening AJE) on the 1120-S? | |
| July 3, 2008 | |
| Sorry, if I mislead. Rereading this, I realize that I was talking about the books and not the returns. Yes, just as you suggest. There's no taxable transaction. | |
