Welcome Guest. Register Now!  


For 2013 Tax Tips For Year 2013.


Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 03-01-2014, 08:28 PM
Junior Member
 
Join Date: Mar 2014
Posts: 2
Exclamation Entity change: Inc to LLC

Hello,

I have quite a difficult question, that I have not been able to find a sure answer to.

I have someone who is switching from his S-Corp to LLC (I know, I gave him my opinion/advice, but it's his choice).

Normally, when changing entity type from LLC to Inc, you can do Property in exchange for Stock and as long as the owner meats the ownership requirement then that event is tax exempt.

My question, is there an equivalent step when switching from Inc to LLC. Would one do Stock in exchange for property? Would this still be tax exempt if the ownership test is met?

I could not find anything on the specific situation so far.

Any help is greatly appreciated.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 03-02-2014, 04:11 AM
Moderator
 
Join Date: Oct 2010
Posts: 5,231
Quote:
Originally Posted by borsvadim View Post
Hello,

I have quite a difficult question, that I have not been able to find a sure answer to.

I have someone who is switching from his S-Corp to LLC (I know, I gave him my opinion/advice, but it's his choice).

#1;Normally, when changing entity type from LLC to Inc, you can do Property in exchange for Stock and as long as the owner meats the ownership requirement then that event is tax exempt.

#2;one do Stock in exchange for property? Would this still be tax exempt if the ownership test is met?

I could not find anything on the specific situation so far.

Any help is greatly appreciated.
#1; aslongsas you transfer property/ money to a corp solely in exchange for stock in that corporation other than nonqualified preferred stock, and immediately thereafter you are in control of the corp, the exchange is usually not taxable. This rule applies both to individuals and to groups who transfer property to a corp. It also applies whether the corp is being formed or is already operating. It does not apply if the corp is an investment company. The property is transferred in a bankruptcy or similar proceeding in exchange for stock used to pay creditors.
The stock is received in exchange for the corporation's debt other than a security or for interest on the corporation's debt including a security that accrued while you held the debt; no gain or loss is recognized provided, you receive ONLY STOCK in exchange for your property.

#2; I tonly applies to transfers to controlled corps. To move assets from a corp to an LLC would involve a corporate liquidation, then transfer to a LLC, or formation of a LLC in which the corporation is a member.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #3 (permalink)  
Old 03-02-2014, 05:00 PM
Junior Member
 
Join Date: Mar 2014
Posts: 2
Quote:
Originally Posted by Wnhough View Post
To move assets from a corp to an LLC would involve a corporate liquidation, then transfer to a LLC, or formation of a LLC in which the corporation is a member.
Exactly. So, what I'm trying to figure out is if the this event is tax exempt (in how it is when doing "Property in Exchange for Stock"). Normally, the amount the property is sold for (being the worth of Stock owned in the Corp) would normally be subject to taxation.

Is there maybe an exemption to this in the case of just an entity change? Any way to transfer the property from the Inc (100% controlled) to the LLC (sole member) without paying having to pay the taxes for that property since the practically nothing is really changing in ownership or operation.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Suggestion for entity formation Alli Income 0 10-28-2013 04:12 PM
1099 from dissolved entity to new c-corp owner.cws S-Corporation 1 08-26-2011 03:10 PM
Tax Entity cinjinbrew Sole-Proprietorship 1 02-11-2011 03:56 AM
1099-A to incorrect entity, bankruptcy musikal Limited Liability Company 0 03-31-2010 12:24 AM
LLC taxed as C corp convert to disregarded entity Nathaniel Limited Liability Company 1 09-21-2008 03:26 PM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning