Converting assets from S corp to personal business

[equinecpa]

I have a client that is in the process of winding down an S corporation business over a couple of years.

One division of the business she wishes to continue as a schedule C business. She'd like to remove these assets from the corporation at the end of 2008 and report the business on a schedule C for 2009. Can the assets be moved from the S corporation to the schedule C business without tax consequences? Or does the S corporation report a sale at FMV, thus reporting a gain/loss as applicable. She is the sole shareholder of this S corporation if that makes any difference.

She will be continuing the S corporation with the remaining division for a couple of more years and then it will be dissolved, so this is not a complete liquidation.

[veritas]

The assets

converted will be treated as a sale at FMV.

If the corporation was a C-Corp in the last 10 years you maybe facing Built in Gains tax.

If there is a loss because the FMV is less than the tax basis you can not take the loss because of related party rules.