1065 to 1120S

[John3cpa]

Two owner LLC who has previously filed 1065 filed 2553 and got IRS approval for S effective Jan 1, 06. Both capital accounts in 1065 are negative due to large depreciation of trucks, they are in the waste hauling business (not the Sporano's). The business has continued in operation under the same name and ID numbers. Can I just continue on with the same opening balance sheet on the 1120S as would have been on the 1065?

[OldJack]

Off hand I can't locate a reference for you on this subject except TTB 20-12 under the heading of Publicly Traded Partnerships (PTPs) where it states: (see attached)

[John3cpa]

Thanks

Thanks Jack!!

[ChEAr$]

Go for it

Two owner LLC who has previously filed 1065 filed 2553 and got IRS approval for S effective Jan 1, 06. Both capital accounts in 1065 are negative due to large depreciation of trucks, they are in the waste hauling business (not the Sporano's). The business has continued in operation under the same name and ID numbers. Can I just continue on with the same opening balance sheet on the 1120S as would have been on the 1065?

I see no reason why not. So equity is a negative. "We" can't insist that clients contribute
enough cash to make it positive.

However I can't see how large accumulated depreciation would in itself cause negative
equity. After all, we can't depreciate any asset lower than cost, right? Must be some
other reason which will show on balance sheet as the cause of negative equity. Like
negative retained earnings balanced by a lot of debt.