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DVPr1me
Returning Member

Transferring assets from one S-corp to another S-corp in the same year

Hello,

 

I closed my LLC (taxed as S-corp) on June 1st 2021 and incorporated a new company (taxed as S-corp)  on June 11th 2021. Both S-corps have different EINs. I read through the following posts on the forum:

 

https://ttlc.intuit.com/community/business-taxes/discussion/transfer-of-assets-from-proprietorship-t...

 

https://ttlc.intuit.com/community/business-taxes/discussion/i-have-a-single-member-llc-that-transiti...

 

Based on the aforementioned posts, it seems like I will need to close my LLC (report final return) for 2021 via 1120-S. Then get corresponding K-1. When i close I need to mark all assets as removed for personal use. Then use the form 4652's that are generated and then file 2021 return for my new S-Corp (form 1120-S) and add all those assets back in. 

 

However, in TT business 2021 when I try to dispose the asset, the only options I see are: sold, stolen, a casualty loss, given away, disposed of by some other means. I selected disposed off as some other means and in the generated form 4562 I see the "code" column marked as S which stands for sold per the legend on the form. There is no option for special handling and removed for personal use as mentioned in the posts above. Is it fine to have the form 4562 code be S in my case? 

 

Thanks in advance for any help!

 

2 Best answer

Accepted Solutions
tagteam
Level 15

Transferring assets from one S-corp to another S-corp in the same year

You are essentially liquidating an S corporation and starting a new entity. 

 

I will page @Rick19744 for input, but you might also want to seek in-person guidance from a local tax professional.

 

There is a way for corporations to do this on a tax-free basis (of which @Rick19744 can add input also), but it would probably be too late to rectify any missteps since the deal was done over a year ago.

View solution in original post

Rick19744
Level 12

Transferring assets from one S-corp to another S-corp in the same year

A few comments:

  • First, this is not a transaction that is conducive to handle in a forum such as this
  • The two links you reference are completely different entity structures and in no way are relevant to your potential "restructure"
  • A state conversion from an LLC to an Inc is a state formality.  You were already being treated as an Inc for federal income tax purposes when you made the S election
  • There is no discussion of why this transaction is taking place.  There are many unknown facts yet to be understood
  • Depending on why this change is occurring, this could either be an F reorganization (nontaxable) or it could be a taxable event.  However, this late in the game, it is more likely than not a taxable event.  There is no documentation reflecting the planning and reason for the change which could impact the decision.
  • Liquidating an S corporation is a taxable event.  It is deemed as if all assets are sold at FMV and the gain is then taxed at the shareholder level.  Generally not the result a taxpayer wants, but possibly ok depending on the assets in the S corporation.
  • You need to meet with a tax professional and explain the facts, reason for wanting the change, explain what you have done at the state level and I am sure more questions will arise.  And only having a couple of days to arrange this discussion is not a lot of time; especially if the tax professional has many pass-through entities on extension.
*A reminder that posts in a forum such as this do not constitute tax advice.*

View solution in original post

4 Replies
tagteam
Level 15

Transferring assets from one S-corp to another S-corp in the same year

You are essentially liquidating an S corporation and starting a new entity. 

 

I will page @Rick19744 for input, but you might also want to seek in-person guidance from a local tax professional.

 

There is a way for corporations to do this on a tax-free basis (of which @Rick19744 can add input also), but it would probably be too late to rectify any missteps since the deal was done over a year ago.

DVPr1me
Returning Member

Transferring assets from one S-corp to another S-corp in the same year

Thanks for the response.  I filed a certificate of conversion from LLC to Inc. in Texas and changed the company name. I also got a new EIN in the process. All my assets are being carried forward into the new company.  Does this still fall into the liquidation category? I saw the above posts mention removing the assets for personal use and putting it back into the new corp.  Also, I filed an extension to file for both my LLC and Inc. so I have until Sep 15th 2022. 

Rick19744
Level 12

Transferring assets from one S-corp to another S-corp in the same year

A few comments:

  • First, this is not a transaction that is conducive to handle in a forum such as this
  • The two links you reference are completely different entity structures and in no way are relevant to your potential "restructure"
  • A state conversion from an LLC to an Inc is a state formality.  You were already being treated as an Inc for federal income tax purposes when you made the S election
  • There is no discussion of why this transaction is taking place.  There are many unknown facts yet to be understood
  • Depending on why this change is occurring, this could either be an F reorganization (nontaxable) or it could be a taxable event.  However, this late in the game, it is more likely than not a taxable event.  There is no documentation reflecting the planning and reason for the change which could impact the decision.
  • Liquidating an S corporation is a taxable event.  It is deemed as if all assets are sold at FMV and the gain is then taxed at the shareholder level.  Generally not the result a taxpayer wants, but possibly ok depending on the assets in the S corporation.
  • You need to meet with a tax professional and explain the facts, reason for wanting the change, explain what you have done at the state level and I am sure more questions will arise.  And only having a couple of days to arrange this discussion is not a lot of time; especially if the tax professional has many pass-through entities on extension.
*A reminder that posts in a forum such as this do not constitute tax advice.*
DVPr1me
Returning Member

Transferring assets from one S-corp to another S-corp in the same year

Thanks. I guess I will just defer this to a tax professional this time. 

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