Closing an S-Corp

[WhiteOleander]

Not real sure how to proceed.

Client has a very small S-Corp. Husb/Wife. They really never should have statred the S-Corp. But they did.

They are stopping the business. Only about 2-3 years old. They only have a few things on deprec. All Sec 1245 items. Can they be sold for the adjusted basis to the stockholders to move them out of the corp back to the S/H's?

What is the best way to do this?

Thanks.

[veritas]

If they are not going to sell the property and they take it out of the corporation it comes out at fair market value. If that is less than the tax basis you do not get the loss. If it is a gain it's taxable.

[WhiteOleander]

OK Thanks. That makes sense.

[OldJack]

If they are not going to sell the property and they take it out of the corporation it comes out at fair market value. If that is less than the tax basis you do not get the loss. If it is a gain it's taxable.

To further clarify, the tax basis referred to (with a loss not allowed) is the tax basis in the shares of stock and not the tax basis in the individual §1245 asset.