Real Estate moved into an SCorp

[BHoffman]

I have resigned from this client, but agreed to close the books through Dec 31, 2009. I will not be preparing the tax returns.

The client owns a partnership and an SCorp. The partnership held commercial real estate. He transferred the deed to the SCorp. He kept the mortgage loan within the partnership. The lender agreed to this because the owner is personally liable for the note, and the loan is still secured by the real estate regardless of which entity has the title.

After having been made aware of what he had done, I advised him to get that real estate back into the partnership. I believe he will do this pretty soon in 2010, but frankly, that will be someone else's problem.

I'm wondering what others would do? Leave the real estate in the partnership books since they will be transferring it back within the next few weeks? Take it as a distribution from the partnership and a contribution to the SCorp? Make a note and leave it up to the next accountant to decide?

I'm aware of my liability exposure in preparing the books and have already taken the necessary steps to CMA.

Thanks for any opinions / advice

[Maribeth]

Just my humble opinion, but I would prepare the books reflecting the facts as of 12/31/09, showing the transfer of the property to the Scorp.

The client may or may not transfer the property back, but that is in 2010, and you are only responsible for the books through 12/31/09.

Maribeth

[BHoffman]

Maribeth - thank you for posting your opinion. You are one of my favorite posters, and always so very clear when talking about SCorps.

I'm going to take your good advice

[Maribeth]

Oh, my, thank you. <<checks red with blushing>>

[BHoffman]

I'm buttering you up because I'd like to PM you with a few questions as I get going on this

....and you are awesome

[Maribeth]

I'm considering myself to be properly buttered. I will help you as the best I can.

Maribeth

[geekgirldany]

I'll throw my 2 cents in I agree that I would only do what is required. Show the transfer in the books and let the accountant doing the taxes worry about it.

[S T]

Well

I will add my 2cents worth as well!

Make sure your Books/Accounting are "clean" to pass on to the person that will be preparing the Tax Return.

Obviously you are having issues with what is transpiring business wise or you would not be resigning from this engagement. Obviously you do not want your name on any tax returns, obviously you need to CYA on the Accounting.

I am thinking, make the appropriate entries and then move forward

Sandy

[BHoffman]

I'm up to 4 cents and glad you guys are commenting. I'm being careful about the due diligence.

Thanks!