topic Switch LLC to Scorp in Business & farm

Switch LLC to Scorp

chuckstark — Mon, 03 Jun 2019 20:04:40 GMT

I am converting my California LLC multi-partnership to an S-Corp. In Turbo Tax to I check the box stating "the partnership ended in 2017"?

And, if I so, what do I enter in the "Describe Partnership Disposal"?

A couple of questions: 1) Have you filed the appropriate...

Rick19744 — Mon, 03 Jun 2019 20:04:42 GMT

A couple of questions:
1) Have you filed the appropriate forms with the IRS and received approval?
2) Are you or have you filed a final form 1065 for 2017?

Yes, we have filed the appropriate forms. We have not rec...

chuckstark — Mon, 03 Jun 2019 20:04:43 GMT

Yes, we have filed the appropriate forms. We have not received approval yet but don't expect any issues.
We did file the final 1065 for 2017. thanks!

Perfect. Technically the partnership / LLC has liquidated...

Rick19744 — Mon, 03 Jun 2019 20:04:44 GMT

Perfect.

Technically the partnership / LLC has liquidated and the deemed transaction is that all assets and liabilities were transferred to the corporation (which elected S status) in exchange for the stock of the corporation. The LLC then distributed the stock to the members in liquidation of the partnership / LLC.

The best avenue in TT is to say that you "sold" your interest. There will be a set of questions and here you will use your tax basis as both the basis and selling price which will reflect the transaction, but not generate any gain or loss; as there should not be any recognized gain or loss on this conversion.

Now, having said that, there is a trap for the unwary. If any member used debt in the past to take a loss on their personal tax return there is potential for at-risk recapture. This is a complicated area and if a member has this scenario, I recommend you consult with a tax professional.

Finally, your stock basis in the S corporation is the same as your basis was in the LLC.

Thanks! I appreciate the help.

chuckstark — Mon, 03 Jun 2019 20:04:45 GMT

Thanks! I appreciate the help.

Welcome.

Rick19744 — Mon, 03 Jun 2019 20:04:46 GMT

Welcome.

Re: Perfect. Technically the partnership / LLC has liquidated...

Andre2099-B — Tue, 25 Feb 2020 17:58:30 GMT

What does 'basis' mean in terms of numbers?

I am closing our Partnership and this is the last filing. I need to dispose of the assets. We opened the same business for 2020 but as a sole proprietor.

I don't know what "Share basis" means or what someone else said "Tax basis" means in terms of what to put in the amount sold. Please translate.

I don't want to pay capital gains for what essentially cost us money and should be a deduction. Can we just put in $1 for each asset?

Re: Perfect. Technically the partnership / LLC has liquidated...

Rick19744 — Tue, 25 Feb 2020 21:39:40 GMT

Need some additional facts:

What happened to the assets of the partnership?
What type of assets are we talking about?
How many partners were there in the partnership?

Re: Perfect. Technically the partnership / LLC has liquidated...

JamesG1 — Tue, 03 Mar 2020 23:13:21 GMT

'Tax basis' for your purposes is the 'adjusted cost basis' or 'basis' in the assets of the partnership.

Review here for basis considerations.