Unfortunately, you do not have a simple transaction. A few comments:
- Your facts don't indicate whether you were the sole S corporation shareholder, but I am assuming you were.
- Based on the limited facts, you are liquidating the S corporation (whether you have or are in the process of doing so).
- This process unfortunately can have immediate tax consequences. So depending on the $$ involved, you may want to get some professional input.
- When you liquidate an S corporation, and there are property distributions, there is a deemed sale of the property at FMV. This means that you report actual gain at the S corporation level and this gain is then reported (and taxed) at the shareholder level. This includes any depreciation recapture which may be taxed as ordinary income depending on the property (real estate will be capped at 25%). No loss is allowed. This computation needs to be done on each asset; no netting.
- You then need to determine your overall gain or loss on the S corporation liquidation. This could be a second level of gain, but clearly not sufficient facts to provide any input.
- The liquidating distributions should be reported on form 1099-DIV and NOT on the final K-1.
- Since there is a deemed sale, your beginning basis for depreciation is as if you had just purchased the asset(s) at the liquidating FMV. The date of "purchase" is the date of the liquidating distribution.
- Make sure you contact your Secretary of State as there may be formalities to close the corporation.
- TT is a software that is generated for the masses and does not always have the ability to provide guidance for more technical transactions. However, in this case, it is not a TT issue but rather just not understanding the complexity of the transaction and how the new assets are then input as a result of a liquidating distribution.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
