About transferring business from personal to s corp (same owner)

[daliashehata]

I have a client who has a personal business under his name and filed 2019 for sch c.  In 2020, he transferred that personal business to s corp which is also under his name. 

In this situation, how can we file this for 2020? 

Also, if he has depreciated assets from sch c, how can we file this on s corp?   

[sjrcpa]

Sch C for the part of the year it as a sole propritirship. Short year S Corp for the part of the year it was an S Corp. Short year depreciation on Sch C. Fixed Assets with their accumulated depreciation move to the S corp and short year depreciation in the S corp.

Attach the 351 statement.

[qbteachmt]

I'd like to help you with this: "he transferred that personal business to s corp which is also under his name"

Let's call this what it is, not how you described it.

He formed a Corporation, submitted the election to be an S Corp, then contributed the resources from his Sole Proprietorship business to be Corporate (assets, liabilities, ability and rights to be in business).

I really like web articles that help explain, for instance, the complexity of 351 is here:

https://blog.vcexperts.com/2015/03/16/what-is-a-section-351a-tax-free-exchange/

For example: "The corporation‘s basis in the property it receives in an exchange for its stock is the same basis you had in the property when transferred (in other words, the corporation takes your basis)."

But Depreciation does not transfer into the corporation. It has the Value of the transfers In, and depreciation starts from there.

He also would file for the FEIN and be an Employer, and now he is an employee-shareholder.

There is no Owner.

There are no longer Draws.

You might want to get some mentoring on this.

[kkwhitecpa]

Where is the 351 Statement in Lacerte?

We changed software companies this year and can't find it.

Thanks!

[PhoebeRoberts]

Create your own and use the Notes screen. Be sure to flag it as a Statement on the left, so it goes with the e-file.

[sjrcpa]

I don't think there is one. You can type it up in the Notes Screen, choosing the Statement button.

[Terry53029]

I agree with @qbteachmt The assets are given to the Scorp in exchange for Scorp stock. That will be your stock basis in the new Scorp (your basis in the assets transferred) The Scorp's basis is same as yours, and the Scorp will start a new deprecation schedule.

[CECIII]

"transferee corporation continues to depreciate the transferred assets, using the same depreciation basis, depreciation method, remaining depreciable life, and rate as the transferor."

https://www.thetaxadviser.com/issues/2020/sep/incorporating-single-owner-business.html

Section 351(a) also overrides the depreciation recapture provisions (except where the
transferor must recognize gain as result of receipt of boot). The potential recapture gain is
preserved in the transferee corporation’s basis in the transferred property.

https://www.mayerbrown.com/public_docs/misc_tax_considerations_111606.pdf

[CPAMama91]

I am getting ready to finalize an 1120 in which the sole shareholder transferred most of the assets to the new C-Corp from his sole proprietorship (LLC). If I'm understanding correctly, the remaining depreciable life and basis is carried to the C-Corp...How should I enter the assets on the depreciation schedule so that the assets are depreciated correctly going forward? Should I enter the original date acquired, prior depreciation, method, etc from the LLC's depreciation schedule? Or should I input the date acquired as the date of the 351 exchange, and somehow force the program to pull the correct depreciation amount? I'm not sure of the best way to do this - sorry if this is a dumb question!