Discussion:S Corp To S Corp transfer of asstes and liablities
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| {{ForumReplyPost|UserID=Riley2|Date=8 September 2009|Text=I see no F reorg hers. Sounds more like a Type D reorg with a Sec. 355 distribution of stock.}} | {{ForumReplyPost|UserID=Riley2|Date=8 September 2009|Text=I see no F reorg hers. Sounds more like a Type D reorg with a Sec. 355 distribution of stock.}} | ||
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| + | {{ForumReplyPost|UserID=Riley2|Date=8 September 2009|Text=I see no F reorg here. Sounds more like a Type D reorg with a Sec. 355 distribution of stock.}} | ||
Revision as of 20:57, 8 September 2009
Discussion Forum Index --> Advanced Tax Questions --> S Corp To S Corp transfer of asstes and liablities
Discussion Forum Index --> Tax Questions --> S Corp To S Corp transfer of asstes and liablities
| 8 September 2009 | |
| I have a client who is transferring his retail business to a new s corp . He is transferring all inventory and assets and liablities of that part of business and keeping only the wholesale business in the old s corp. Both are 100% owned by him.
How do I show the transfer of inventories and asstes and liablities as a tax free exchange( is it a sec. 351 exchange)? What forms do I use? Please help. | |
| September 8, 2009 | |
| It's potentially a D reorganization, but that is going to be subject to some questions.
Has the transaction already happened, and if so, what exactly happened in form? What is the client's business goal for this change? | |
| 8 September 2009 | |
| The transaction happened in march 2008.He started a new s corp in NC and started reporting all sales and sales tax under that new s corp. The payroll has been reported on old S corp ( the client forgot to change that info with payroll company)
The old corp. was incorporated in NY and reported the wholesale and retail business together in 2007. Before that year the old s corp only did wholesale business. He wants to separate the wholesale and retail businesses . They have been maintaining separate books for both of them so we know what assets and liabilities belong to both the businesses. the client wants to separate the businesses as he may eventually close the retail business if it is not profitable but will keep running the wholesale as that is profitable. How do we show the transfer of inventories as they were closing inventories on 2007 return and also transfer assets and liablities without any tax consequences. Thank you. | |
| 8 September 2009 | |
| By the way he is going to dissolve the old s corp in NY and start a new in NC (as he moved there) for his wholesale business. So he will dissolve the old s corp as of end of 2009 . | |
| September 8, 2009 | |
| You don't have to liquidate the old one. Just F Reorg, which is nothing more than fancy change of address for the corp, keeps the ID#, just moves it to the new state, NO change on tax front except for new state. | |
| 8 September 2009 | |
| But he already got a new FEIN and State sales tax I.d for the new corporation.
And he wants to seperate both the retail and Wholesale business. | |
| September 8, 2009 | |
| Switching the state of incorporation of the wholesale company will probably be an F reorganization. The separation of the lines of business can't be. For that, it could be a D reorganization, but you have some serious issues: it's not clear to me whether the two trades or businesses are sufficiently distinct, and you would have to be relying on step transaction principles to deal with the form not complying with the statute (since, in form, there was apparently no distribution of stock). If you don't qualify, it's a taxable distribution (possibly a partial liquidation, which probably makes no difference) and then a 351 incorporation.
Of course, if this were being undertaken now, you would explain that there is no need for all of these hassles just to produce separate books for management purposes, and that, if entity separation was necessary for, say, the interests of separate creditors, it could easily be achieved with LLC subsidiaries or QSSS's, but of course it's too late for that here. | |
| 8 September 2009 | |
| so what do you recommend we do?
The wholesale is a commission based business and the retail business he sells goods of the same category. | |
| 8 September 2009 | |
| I see no F reorg hers. Sounds more like a Type D reorg with a Sec. 355 distribution of stock. | |
| 8 September 2009 | |
| I see no F reorg here. Sounds more like a Type D reorg with a Sec. 355 distribution of stock. | |
