1120s question

[RichardTillett2760]

I am not a first time TT user.  Can I still ask a question? --Richard

[TeresaM]

Yes, of course.

[RichardTillett2760]

I have used TurboTax Business for 2 decades.  I have filed an 1120s for my single owner S-Corp business every year for 22 years.  On June 30, 2022 I retired and sold the business to an employee for $50,000.    I entered in June 30th as ending date for my 100% ownership and start date for my successors 100% ownership.  When I enter in the info in TurboTax for the income the business had in the first 6 months of 2022 it generates the K-1 and divides the income in half.  All of the income is mine though.   The new owner is not going to file an 1120s and is instead going to go with a single member corporation and bring the income over to Schedule C instead of a K-1.  So if I enter in that this is the last business filing then TurboTax says the Form 8594 won’t be generated, but it is my understanding that both seller (myself) and buyer have to file this 8594 that breaks down the acquisition cost by category.   I did print his form and provide it to him already.  If I change ownership change date to 12/30/22 then the income shows as 99.72% mine and .28% his.  I can live with the few hundred dollars lost income, but I know it is not right.   I thought maybe I could answer YES to distribution question, but TurboTax does not follow that up as to whom and when the distribution is applied so that does not fix anything; only makes the numbers all out of balance.   Do I just instead mark this a final return and forego the 8594 form?  And don't mark that I sold the business, but just ceased operation?

[RobertB4444]

If you make a change in ownership percentage at any point during the year then the income is split over a weighted average.  If all of the income and expenses are yours for 2022 then the new owner owned it on paper but didn't actually begin possession of the company until he controlled it.  He has control as of January 1st 2023.  So you can simply change him in for you on the 2023 return and file the 8594 with that.

@RichardTillett2760 

[RichardTillett2760]

Thank you Robert.  He had his own income and expenses for the business though from July1 onwards and was going to file his own return, but not an 1120s as he was advised to file a single member LLC so directly on a Schedule C.

[RobertB4444]

Perfect.  Then this 1120S that you're filing should be just about you.  He shouldn't be anywhere near it.  His version of the business will be elsewhere with a completely different EIN.  You will file your 2022 return letting TurboTax know that this is your final return.  Then it's all done.

Congratulations, by the way.

@RichardTillett2760 

[RichardTillett2760]

Yes.   Except he kept the EIN.  Needed it to show business continuance for contracts. 

[DianeW777]

An EIN doesn't leave the entity it was obtained and created for.  My advice is to file the 1120S with the EIN that belongs to it as the final return.  Then have the new owner obtain a new EIN (if there are employees) for his ongoing self employment in this activity.  The new owner can continue to show the history of the company purchased with historical records.

• Closing a Business

[RichardTillett2760]

OK. But what about the 8594 form?  It won't generate it if I file as last return.

[AliciaP1]

You will need to fill out the Form 8594 yourself and you will need to mail your return in rather than e-file.

@RichardTillett2760 

[Mike9241]

did you sell your stock or did you sell the corporation's assets? there are different filing responsibilities depending on which.