Intangible asset for new S-Corp

[GTS1101]

I am becoming an s-corp in Jan 2012. Someone brought something up I never thought of and that is the value of my client list with my sole prop. I am shutting down the sole prop tomorrow 12/31/11. Does the value of my client list become an asset and add to my basis in the S-Corp? If yes how do you determine the value of your client list. I had over 840 clients last year. Would I need to contact someone who sells tax practices to figure out a value? And would that be depreciated in the S-corp?

Thanks!

GTS1101

[BOB W]

I am becoming an s-corp in Jan 2012. Someone brought something up I never thought of and that is the value of my client list with my sole prop. I am shutting down the sole prop tomorrow 12/31/11. Does the value of my client list become an asset and add to my basis in the S-Corp? If yes how do you determine the value of your client list. I had over 840 clients last year. Would I need to contact someone who sells tax practices to figure out a value? And would that be depreciated in the S-corp?

Thanks!

GTS1101

I would say NO. Just take your SP trial balance and plug it into your Scorp trial balance. A step up in basis happens if a sale took place. This is not a sale.

[Jiggers]

Think a minute. If you put a value on the client list and put that into your new S-corp, you would have to report the income on your personal return because you would be selling it to the corp.

[ChEAr$]

First a technicality. YOU don't become an S corporation. You form a corporation, with or without a lawyer, do the paperwork and receive a charter from the state. You then issue stock to the shareholder(s), which may of course only be you. That stock has a value which must be paid for by your own funds, unless it's no par stock, but see a lawyer if your state allows this.

Any assets to be put into the corporate name (not client list as discussed above) are valued at FMV and transferred either as part of the initial capital (premium on common stock) and/or in the form of a stockholder's loan.

Been there; done that. Any questions, just email me.

[veritas]

one point a Stockholder loan

.

Any assets to be put into the corporate name (not client list as discussed above) are valued at FMV and transferred either as part of the initial capital (premium on common stock) and/or in the form of a stockholder's loan.

Been there; done that. Any questions, just email me.

would defeat a tax free transfer to the corporation under Sec. 351.

[BOB W]

First a technicality. YOU don't become an S corporation. You form a corporation, with or without a lawyer, do the paperwork and receive a charter from the state. You then issue stock to the shareholder(s), which may of course only be you. That stock has a value which must be paid for by your own funds, unless it's no par stock, but see a lawyer if your state allows this.

Any assets to be put into the corporate name (not client list as discussed above) are valued at FMV and transferred either as part of the initial capital (premium on common stock) and/or in the form of a stockholder's loan.

Been there; done that. Any questions, just email me.

I disagree.......... Assets going into the corporation go in at cost or adjusted basis, otherwise there would be a gain to the Sole Proprietor upon transfer. Assets coming out of the corp are required to come out at FMV.

[ChEAr$]

I disagree.......... Assets going into the corporation go in at cost or adjusted basis, otherwise there would be a gain to the Sole Proprietor upon transfer. Assets coming out of the corp are required to come out at FMV.

We're not disagreeing. I was speaking of the accounting treatment of assets, not the tax treatment. Sorry not to have so specified.

[BOB W]

OOPS......... My error........... I alway treat accounting and tax with the same basis.

[ttbtaxes]

You can record the FMV for book purposes but it does not add to your tax basis.