How do I properly record converting an LLC into a ...
New Member

How do I properly record converting an LLC into a C Corporation in TurboTax?

I converted my LLC to a C Corporation during 2019. When filling the K-1 entry in TurboTax, I checked "This partnership ended in 2019", followed by "Disposition was not a sale".

However, on the next page it asks me to fill in the Purchase Date and Sale Date. I just said it wasn't a sale!

Should I put Purchase Date and Sale Date as the date of conversion?
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Level 15

Business & farm


@accounts-mint wrote:
I converted my LLC to a C Corporation during 2019. When filling the K-1 entry in TurboTax, I checked "This partnership ended in 2019", followed by "Disposition was not a sale".

Who prepared the 1065 for your LLC?

 

Your K-1 should indicate that it is a final K-1 and, typically, a short tax year ending at a certain date in 2019 since the LLC terminated.

 

You can also select "No entry" for a disposition.

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New Member

Business & farm

Thanks for the reply. The 1065 was prepared by the company's accountants. 

 

The K-1 does indicate that it is final, and shows a short tax year.

 

However, TurboTax asks for a "Purchase Date" and "Sale Date" -- what should I enter for those?

 

Is "no entry" better than "not a sale"? I don't understand what these choices actually do.

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Expert Alumni

Business & farm

Also, converting an LLC to a C corp may trigger a taxable event. You should have been tracking your basis in the LLC and when converted should now become your basis in the C corp except of course you contributed additional capital.

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Level 15

Business & farm

Keep in  mind also for the S-Corp that the business start date is the same exact date the partnership was started -even if in a prior year. But the "incorporation" date is the day after the partnership was terminated. It's important to understand that, or asset depreciation will be thrown out of whack.

 

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New Member

Business & farm

Thanks for the tip.

 

Under what circumstances would it trigger a taxable event?

Wouldn't whatever tax obligations I have be reported on the K-1?

 

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New Member

Business & farm

It's a C corp, not an S corp.

 

I'm just trying to understand what Turbotax wants for the "Purchase date" and "Sales Date'.

 

Like, what is asking for?

 

Are you saying that you think that "purchase date" = "business start date" and "sale date" = "conversion date"?


How does this affect asset depreciation?

 

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Level 15

Business & farm


@accounts-mint wrote:

I'm just trying to understand what Turbotax wants for the "Purchase date" and "Sales Date'.


You can actually leave those fields blank as long as you have indicated you disposed of the property and entered a date for the disposition.

 

When you transfer your 2019 return to your 2020 return (next year), the asset will not appear.

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