Discussion:LLC Transfer to S Corp- Depreciation
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| Revision as of 15:58, 1 September 2009 JR1 (Talk | contribs) (And perhaps I sh) ← Previous diff |
Revision as of 16:28, 1 September 2009 Lrussell (Talk | contribs) (I have similar s) Next diff → |
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| {{ForumReplyPost|UserID=JR1|Date=September 1, 2009|Text=And perhaps I should clarify. You don't re-179 them. This is a 351 transfer like any other, so the old balance sheet becomes the new except for changes in the equity section. But you can take the 179 originally on the 1065, they'll then roll over at cost and fully depreciation onto the new. You must continue on, you don't start over.}} | {{ForumReplyPost|UserID=JR1|Date=September 1, 2009|Text=And perhaps I should clarify. You don't re-179 them. This is a 351 transfer like any other, so the old balance sheet becomes the new except for changes in the equity section. But you can take the 179 originally on the 1065, they'll then roll over at cost and fully depreciation onto the new. You must continue on, you don't start over.}} | ||
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| + | {{ForumReplyPost|UserID=Lrussell|Date=1 September 2009|Text=I have similar situation. Client was single member LLC (filing on sch C). In 2008 became a S-corp effective 1/1/08 (still a LLC at state level). I am trying to figure out the equity section. They use Quickbooks and same Quickbooks file as when filing as a schedule C. So the equity shows retained earnings from all prior years, all draws, and all prior contributions. I'm thinking the equity section should just contain some amount allocated to stock (say $1,000) and the difference should be the amount of their contribution under section 351 plus and new contributions or minus any distributions for 2008. Is my thinking correct, that the equity sections start over even though it is the same company because it is filing now as an s-corp?}} | ||
Revision as of 16:28, 1 September 2009
Discussion Forum Index --> Basic Tax Questions --> LLC Transfer to S Corp- Depreciation
Discussion Forum Index --> Tax Questions --> LLC Transfer to S Corp- Depreciation
FloridaTaxes (talk|edits) said: | 1 September 2009 |
| A have a client who currently has a 2 member LLC. As of 10/1, they are going to officially transfer the LLC into an S Corp with the state of Florida. They are showing a profit YTD but will spend money in the next few months that will probably end their year with a very small profit or even a small loss for the full year. They have some assets worth around $3,000 that were acquired new in January of 2009. My question is- do those assets get depreciated on the 1065 for the LLC or the 1120s for the S Corp or both? There are no other assets that have not been fully depreciated. Can they still get the 179 deduction?
Since the LLC pays SE tax it would be to their advantage to take the depreciation on the LLC's books, not the S Corp's. Since the LLC will cease to exist on 10/1, I am assuming they need to file a short year return for the LLC. Is this correct? Any help would be greatly appreciated. | |
| 1 September 2009 | |
| 1120S because the LLC would have placed the assets into service as well as disposed of them in the same year.
LLC - yes - short year - watch for the due date. | |
Harry Boscoe (talk|edits) said: | 1 September 2009 |
| FLTaxes, when you say "they are going to officially transfer the LLC into an S Corp" do you mean that the members of the LLC are going to contribute their membership interests in the LLC to a newly-formed S corporation in exchange for its stock? Or what? | |
FloridaTaxes (talk|edits) said: | 1 September 2009 |
| In Florida, you can take an LLC and transfer into a Corporation, instead of just starting a new company. If you have been in business for a while and do not want vendors and customers thinking your company is new, this is helpful because the history can be traced. It also dissolves the LLC and forms the Corporation in one step. | |
| 1 September 2009 | |
| Depreciation is claimed on both returns. See IRC Sec. 168(i)(7) and Prop Reg § 1.168-5(b)(4). | |
FloridaTaxes (talk|edits) said: | 1 September 2009 |
| Kevin- does this mean no Sec 179 is allowed because the assets were not technically purchased by the S Corp? | |
| September 1, 2009 | |
| You have to allocate between the old LLC return and the new 1120S. Given the amounts tho', I think you're ok Sec 179'ing them in the LLC. | |
| 1 September 2009 | |
| Florida, for purposed of Sec. 179 there is no purchase here since the property was acquired in a Sec. 351 transaction. §§ 179(d)(2)(C)(i) and 179(d)(2)(A). | |
| September 1, 2009 | |
| And perhaps I should clarify. You don't re-179 them. This is a 351 transfer like any other, so the old balance sheet becomes the new except for changes in the equity section. But you can take the 179 originally on the 1065, they'll then roll over at cost and fully depreciation onto the new. You must continue on, you don't start over. | |
| 1 September 2009 | |
| I have similar situation. Client was single member LLC (filing on sch C). In 2008 became a S-corp effective 1/1/08 (still a LLC at state level). I am trying to figure out the equity section. They use Quickbooks and same Quickbooks file as when filing as a schedule C. So the equity shows retained earnings from all prior years, all draws, and all prior contributions. I'm thinking the equity section should just contain some amount allocated to stock (say $1,000) and the difference should be the amount of their contribution under section 351 plus and new contributions or minus any distributions for 2008. Is my thinking correct, that the equity sections start over even though it is the same company because it is filing now as an s-corp? | |
