On conversion from C corp to S corp, What happens to contributions that were to be carried forward as they were not allowed on prior return?

[ileichter]

Contribution on C corp were no all deducted but were to be carried forward. However, in 2015 C corp became S corp. What happens to those contributions that were not deducted in 2014  Do they pass to the shareholders?

[ChelsiE2 · Accepted solution]

[edited Apr. 13, 2016, 8:28pm]

Converting your C-Corporation to an S-Corporation is a very complicated matter.  Generally, carryovers and carry backs do not transfer directly during this transition.  

I recommend that you consult with a CPA firm in your area to help you accurately calculate this conversion.

[ileichter]

[ THOUGHT THAT CONTRIBUTIONS MADE BY THE S CORP ARE NOT DEDUCTIBLE ON THE RETURN BUT ARE PASSED THROUGH TO THE SHAREHOLDERS ON THE  k-1. WHY WOULD THIS GO TO ADJUST BASIS?  (SORRY FOR THE CAPS)

[ChelsiE2]

@ileichter You are correct.  Nothing is deductible on an 1120-S return.  Everything is passed through and either reported as income or deduction at the individual shareholder level.

Maybe we we are not on the same page as far as what you're calling contributions.  I am assuming that these contributions were the money each shareholder contributed to the company as a way to buy into the company.  Is this what you are talking about or something else?

[ChelsiE2]

@ileichter I spoke with one of my colleagues and he suggested you may be talking about Charitable Contributions.  I will edit my answer above to include Charitable Contributions.  My apologies for the misunderstanding.

[ileichter]

Yes, I was talking about Charitable Contributions

[ileichter]

Is there any way to get the IRS code numbers or regulations that show the deduction being carry foward from C corp to S corp

[ileichter]

I'm getting conflicting answers

[ChelsiE2]

@ileichter I have edited my answer above.  I highly recommend that you meet with a CPA in person to help you with converting your C-Corp to an S-Corp.