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How would you close this Balance Sheet (B/S) asset on the Final Return for S-Corp?

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    How would you close this Balance Sheet (B/S) asset on the Final Return for S-Corp?

    How would you show a disposition of the business vehicle (1245 property) on the Final Return for S-Corp?

    Cost: 60K – Depreciation 32K = Auto Basis 28K

    Auto Loan (Liability) – 22K

    Let’s assume that the auto was sold to the shareholder (S/H) for 45K (FMV) and that current shareholder basis is 2K

    How would you 1) zero-out this B/S item on S-Corp return, 2) where are proceeds flowing and 3) how would you show that S/H had assumed this liability (if needed)?

    #2
    More Info

    1) Had the vehicle ever been owned by the shareholder prior to it being in the corporation?
    2) Does the shareholder own 50% or more of the corporation?
    3) Without respect to the 45K FMV, how much is the stated dollar amount of the sale to the shareholder?

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      #3
      1) No, was immediately owned by a business
      2) Husband and wife are equal partners / shareholders (50%-50%) in this business
      3) I did not understand this question. Shareholders are planning to assume the car and its loan (It was not officially sold last year, or sold for cash).

      Comment


        #4
        I'll take a stab at it:

        Sale of vehicle, FMV 45, Original cost 60, a/d 32, nbv 28

        To record the sale of the vehicle
        Vehicle - 60 cr
        a/d - 32 dr
        loan - 22 dr
        receivable from s/h - 23 dr
        gain on sale - 17 cr

        To record the payment to the corportion of the receivable from s/h
        cash 23 dr
        receivable 23 cr

        Absent any other transactions, the shareholders basis is now 2 + 17 = 19.

        The corporation has 23 in cash, distributes this to the s/h and the s/h has a final capital gain on disposition of stock of 4.

        Haven't done one of these in quite a while, so this is first impression.

        Maribeth

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          #5
          Distribution

          What would happen if shareholders (husband and wife) take the car and assume the loan (no 45K cash payment)?
          Last edited by Tax Advisors; 02-03-2011, 08:24 PM.

          Comment


            #6
            So, we have two events from disposing this car on S-Corp tax return: 17K gain on form 4797 & 23K distribution on 16d?

            Comment


              #7
              Originally posted by Tax Advisors View Post
              So, we have two events from disposing this car on S-Corp tax return: 17K gain on form 4797 & 23K distribution on 16d?
              Yes, first you have to sell the car, then you determine the transactions at the shareholder level.

              Maribeth

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                #8
                Assuming car loan

                What would happen if these shareholders (husband and wife) take the car and assume the loan (no 45K cash payment)? How would that change things?

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