Hi TurboTax!
I was set up as an S Corporation (not an LLC with an S Corp status) and my new CPA informed me that I should just be an LLC with an S Corp election. My CPA said I should do this because there are less requirements like no annual meeting minutes.
My CPA said doing the switch would cause me to dissolve my corporation in the eyes of the IRS and that we'd need to assess the FMV of my assets in order to see if I would have to recognize any capital gains on them. But my company didn't purchase any individual assets over $2,500 during its lifespan and my CPA says that any assets under that amount are just treated as expenses under safe harbor rules.
However, I have assets like this lawn mower I purchased for $600 that is obviously an asset and is currently selling for around $800. In this example, is the $200 difference a capital gain I need to recognize? Or is my CPA correct in saying that my lawn mower is an expense (as it is under $2,500) which is why I can transfer it into my own personal name without recognizing capital gains on it?
I don't doubt my CPA, but I just want to understand why this is and have confidence in it if I am ever audited.
