Proffessional double check

[tax info man]

Client has S-Corp, small never amounted to much. Converting to single member LLC. I believe by reading all posts this is what to do but wanted another proffessional opinion.

Not actually selling but just switching everything over.
Assets have basis of 40k left in them as they were not depreciated much and also note payable on them.
Stock Basis on balance sheet has value of 2400 $1 per share

File Final 1120s final k-1
File form 8832 switching to disregarded entity

Zero Out Balance Sheet

Nothing to distribute so can just sell stock off at wash as not to raise any flags

Do I have to file a form 966 or since this is insignificant just file a final 1120s and k-1

asset basis then carries over to schedule c

thanks

[Lion]

Distribute

Corp distributes all assets at FMV to shareholders creating gains or losses. Shareholders can contribute whichever assets they choose to new LLC or other entity or keep them or sell them.

[TaxLadyinPA]

Client has S-Corp, small never amounted to much. Converting to single member LLC. I believe by reading all posts this is what to do but wanted another proffessional opinion.


File form 8832 switching to disregarded entity

Last year I switched a client from S-Corp to sole member LLC. We had to close the corp and start new. Had to get a new EIN. Well now that I think about it ... When this client first came to me a lawyer had set him up and as usual .. he thought he was an S-corp when in fact he was a C-corp ... so that year we were able to plead insanity, fill the proper forms and he got the S-corp retro back to day 1. That might be why I had to close it totally and start all over when he wanted to become the LLC. Because there is a 5-year rule about changing. I just can't remember at the moment.

Now that I think about it all I probably should not have even tried to respond to your question because I probably just confused you more.

But ... watch out for the State level. It was a realy nightmare here in PA. Their rules state just file FINAL return and it will auto close the S-corp. so we did ... then they kept sending letters wanting this and that ... it got to be such a pain that my client called a friend who was the Aid of one of our Congressman ..... He (the Congressman) contacted PA and they basically didn't care who he was and said .... QUOTE: "We don't care what the new rules state, we want the old paperwork filled out to close this S-corp" UNQUOTE ... Yikes LOL

so good luck with your journey on this and I hope it will not cause you headaches and sleepless nights *sigh*

[oceanlovin'ea]

converting

Beanna Whitlock with NSTP did a very good seminar on LLC's and how to convert an S corp to an LLC.
You might go to their website and see if you can find exact information there. Or get her phone number and call her. She is always willing to talk to preparers and help them out.

In the state of Florida, I formed the new LLC, filed to be taxed as an S corp. Then I filed a merger of the old S corp with the new LLC.

If the new LLC is going to be an S corp and you merge the two, you use the old EIN. If the new LLC will be a schedule C,you would use the new EIN.

IRS doesn't care if you are a corporation or and LLC with the state. They are only concerned with your tax status with them.

Your last return for the S corp would show it as a final return. Then you start fresh with the LLC.

Hope I have helped you a little bit. But I'm sure there are other issues for you to resolve too.

Linda

[tax info man]

so is there anyway to do this without sticking the taxpayer with a huge tax bill from the distribution, I have to be missing something out there. Because of the size of the S-Corp the balance sheet is not required to be filled our or m-1 or m-2 in the past. I gues smy question is that if I just file a final 1120 and fill out the form to swith to a disregarded entity using form 8832 and roll it into a single member llc what will happen.