SMLLC to be taxed as an S Corporation

[TCl123]

I have a client who is a SMLLC and has completed Form 2553, to be taxed as an S Corporation; from what i am reading it looks like it is pretty simple; however, I want to ensure that the entries to move the Balance Sheet items over to the S Corporation are done correctly.  Do you have any insight into this that you would be so kind to share with me?  I am completing a 351 Transfer Statement to include with the tax returns.  From what I have read, I will basically start with a zero Beginning Balance Sheet and reflect the transfer Amount as an M-2 Other Additions for the Balances transferred from the SMLLC books.  Does this make sense to you?

Thank you so much!

[qbteachmt]

Effective when? Which tax year are you working on now?

[TCl123]

Effective 1.1.2023 - 2023 Tax Year

[IRonMaN]

What transfer?  The entity hasn’t changed other than what tax form it files.

[TCl123]

I have read differing ways of handling this.  One suggested the 351 to reflect the transferring in of the basis to the S Corporation.  So, are you saying that all that I need to do is record the M-1 addition for the basis transferred over and continue on?

[IRonMaN]

My beginning balance sheet would be the same as the prior year ending balance sheet.

[TCl123]

I have been struggling to find anything specific on this and since I would need to reflect this as a first year S corporation tax return, I had thought that I would not reflect beginning balances.  I do not want to cause any issues. 

[IRonMaN]

But the entity did have beginning balances and the entity itself is still the same entity.

[TCl123]

That is totally correct.  Do you think that I need to attach a statement or something to the return to prevent any questions or issues.  It should be pretty straight forward since the 2553 was approved.  I think that I am totally just over thinking it.  Thank you!

[IRonMaN]

The accepted 2553 says it all - no additional attachments necessary.  Time to give your brain a rest from all of that thinking you have been doing 😉

[TCl123]

Thank you so much!

The First Year S Corp Return and the idea of Beginning Balances being reflected is what did me in.  LOL  Thank you again!  🙂

[IRonMaN · Accepted solution]

You betcha!