I have a client that formed an LLC in 2005 and elected to be treated as an S Corporation. Within the LLC there are three activities; (1) rental house, (2)investment home, (3) health massage business. As you might expect, there is no accounting system or books. I did their return last year based on summary spreadsheets they provided, and did not review cancel checks, etc. Since the assets and receipts are less than $250,000 no Schedule L was required, or prepared. I might add the assets are few. Mostly the purchase price of the homes & land, and a customer list for the health massage business that was purchased.
It's my understanding the client created another S-Corporation during 2007 (before he saw me) for the health massage business. Of course, nothing was really changed in the practice of the health massage business. No minutes or additional capitalization.
The rental house was sold in 2007 and health massage business discontinued. They'd like to liquidate the LLC and newly created S-Corporation after filing their 2007 returns.
My initial thought is to ignore the newly created S-Corporation since it was never really utilized, and avoid the complications caused by separating the massage business into a new S-Corporation, filing a tax return, then liquidating it.
Instead, I'm considering simply reporting the income & expenses all on the first S-Corp (like last year) then liquidating that business and then closing/liquidating the unused S-Corp (however that's done)
I'd really appreciate some input on this situation, and any guidance on the liquidation process that can be provided. Thanks in advance for your help.
UPDATE: CLIENT CEASED OPERATIONS, BUT CONTINUED TO PAY EXPENSES INTO 2008 FOR RENT, ETC. I ALSO LEARNED THE SMALL PAYROLL WAS PAID USING NEW SUBCHAPTER S TAX ID FOR THE MASSAGE BUSINESS. I'M ALSO TOLD THEY HAD SOME RECEIPTS IN 2008 FOR RECEIVABLES (I'M NOT SURE I BELIEVE THAT SINCE THEY ONLY MENTIONED THE RECEIVABLES AFTER I SAID I WAS HOPING THEY CLOSED THE BUSINESS). SO, I THINK I'M STUCK WITH SEPARTING THE BASIS OF THE MASSAGE BUSINESS FROM THE ORIGINAL LLC (ELECTED TO BE TAXED AS AN S-CORP), THEN PREPARING TWO 1120S RETURNS, LIQUIDATING OR CLOSING BOTH. OF COURSE, THEY'LL HAVE NO IDEA OF THEIR BASIS AMOUNT.
It's my understanding the client created another S-Corporation during 2007 (before he saw me) for the health massage business. Of course, nothing was really changed in the practice of the health massage business. No minutes or additional capitalization.
The rental house was sold in 2007 and health massage business discontinued. They'd like to liquidate the LLC and newly created S-Corporation after filing their 2007 returns.
My initial thought is to ignore the newly created S-Corporation since it was never really utilized, and avoid the complications caused by separating the massage business into a new S-Corporation, filing a tax return, then liquidating it.
Instead, I'm considering simply reporting the income & expenses all on the first S-Corp (like last year) then liquidating that business and then closing/liquidating the unused S-Corp (however that's done)
I'd really appreciate some input on this situation, and any guidance on the liquidation process that can be provided. Thanks in advance for your help.
UPDATE: CLIENT CEASED OPERATIONS, BUT CONTINUED TO PAY EXPENSES INTO 2008 FOR RENT, ETC. I ALSO LEARNED THE SMALL PAYROLL WAS PAID USING NEW SUBCHAPTER S TAX ID FOR THE MASSAGE BUSINESS. I'M ALSO TOLD THEY HAD SOME RECEIPTS IN 2008 FOR RECEIVABLES (I'M NOT SURE I BELIEVE THAT SINCE THEY ONLY MENTIONED THE RECEIVABLES AFTER I SAID I WAS HOPING THEY CLOSED THE BUSINESS). SO, I THINK I'M STUCK WITH SEPARTING THE BASIS OF THE MASSAGE BUSINESS FROM THE ORIGINAL LLC (ELECTED TO BE TAXED AS AN S-CORP), THEN PREPARING TWO 1120S RETURNS, LIQUIDATING OR CLOSING BOTH. OF COURSE, THEY'LL HAVE NO IDEA OF THEIR BASIS AMOUNT.
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