Schedule C - changed to Partnership, best way to handle assets

[snowshoe]

Client filed schedule C prior year. Filed for LLC (Partnership) for this year. They had depreciated items on the schedule C. Is the proper way to 'move' them to dispose of them at zero loss or gain and add them to the deprecation on the 1065 at that lower basis?

[TaxGuyBill]

Correct. There will be no gain or loss, and the Partnership just continue to depreciate them where the individual left off (the original "placed in service" date and the original Basis).

[lady di]

And how about from an S Corp to a Schedule C? distribution and continue on C as above?

[TaxGuyBill]

And how about from an S Corp to a Schedule C? distribution and continue on C as above?

No. It is treated as if the S-corporation sells the property at Fair Market Value. Then the Schedule C starts depreciating it as a new asset, using the new placed in service date and the new purchase/FMV price.

[Lion]

Revoking the S election turns the entity into a C Corp, so also file Form 8832 to elect sole proprietor taxation.

[lady di]

Great...that was what I had done and was second guessing myself after reading this first post.thanks