I have a client that is a single member LLC that made an 8832 elected to be treated as a C Corporation (the election was made before I did their corp.) Basically, he just had a HUD rental house that since it started been carryover a loss each year(currently in their fifth year). The NOL is about $20,000. It is my understanding that after 60 months the LLC can change the election and go back to be the default classification. I am not sure what happens to the Corporation. Do you treat it as liquidation and do a final return?
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The C-corporation would result in a taxable liquidation and final tax return. The house and any other assets would be distributed (sold) to the shareholder/members of the LLC (individual as LLC disregarded) at FMV with any gain taxable to the C-corp. Any NOL would be lost and not deductible by anyone except the C-corp offsetting any C-corp gain from the sale/distribution of assets. The individual would have a gain or loss to report on form 1040 Sch-D for his C-corp investment ownership. The individual could then contribute (if not already titled that way) the house to his/her LLC at cost basis in exchange for LLC ownership basis. -
Clients can surely get themselves into a mess when they do things without consulting first.Dave, EAComment
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ChEAr$,
Harlan Lunsford, EA n LAComment
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Thanks everyone for your help.Comment
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