I’ve got a client who has four entities(A,B,C, and D) each with a different structure and ownership. A new entity (NewCorp) was formed in Nov. 2011 and concurrently the four existing entities transferred all assets and liabilities into the new entity. Combined, they have greater than 80% control of the new entity. My question is this. Entity B is an S-Corp with assets of $200K and liabilities of $280K. So, it is my thinking that to record this transaction requires the assets and liabilities being removed AND an $80K gain hitting the book and tax return. Correct? If so, how do you report it? On Form 4797, Sale of Business Property?