Asset transfer into S-Corp. with liabilities attached

[Gretel]

Do you know of any reason why it is not advisable to transfer assets into the S-Corp. that have liabilities attached or also why it would be better to keep vehicles for which liabilities will be incurred as personal assets?

The only thing I know to keep out of any corp. are buildings.

I never heard about this. A new client was advised so by an accountant friend but couldn't remember the reason.

[geekgirldany]

The only reason I know of would be if the liabilities attached are more than the adj. basis of the asset. Then there would be a taxable gain.

On the autos, they could be transferred if the title is tranferred over to the corporation. From my experience this rarely happens. Unless it is used totally 100% business, then keeping it as a personal asset would allow them to do a accountable plan and reimburse the mileage acutally driven for the business.

Even when the car/truck is in the corporation's name it is not always 100% business.

[Gretel]

Thank, that is the only reason I can see. But it doesn't apply to my client. For him it would actually make sense to buy future trucks in the corp. name since his employees will use them and they will be 100% biz use.

[ChEAr$]

Advisable maybe

Do you know of any reason why it is not advisable to transfer assets into the S-Corp. that have liabilities attached or also why it would be better to keep vehicles for which liabilities will be incurred as personal assets?

The only thing I know to keep out of any corp. are buildings.

I never heard about this. A new client was advised so by an accountant friend but couldn't remember the reason.

But remember, you can't "give" liabilities to someone else unless the creditor assents.

So in order to transfer an encumbered vehicle to the corporation, one would have to
obtain approval of the lender to transfer the liability to the corporation.

[Gretel]

Thanks. That's a very good point. Hasn't crossed my mind yet.