sole proprietor conversion to S-Corp mid year-handling of asset disposition

[lyndaj0331]

I have a client that converted from a sole proprietorship to an S-Corp.  She is the sole member.  I have entered the disposition date of 03/27/23 on all the assets and it reduced the depreciation on the schedule C - good.  However, I don't feel that this is all that I need to do.  Don't I need to show that the disposition of the assets is a nonrecognition event somehow.  Also, when I show that the company vehicle was disposed of on 03/27, it shows a loss.  Do I enter that amount as the sale price to 0 it out?  There has to be a form that I am missing that will take care of all this.  I have been reading schedule C instructions and other web articles and cannot find my answer.  Thank you.

[IRonMaN]

Unless she actually sold the assets before she made the conversion, those are the assets of the new entity so you don't want to show them as being disposed of and creating a loss.

[qbteachmt]

Usually these business items are "contributed" into the S Corp.

"when I show that the company vehicle was disposed of on 03/27"

She got rid of the car, or converted it to personal use only? And now the S Corp has no vehicle, and she will turn in mileage allowance reporting?

[lyndaj0331]

Thank you for responding. How do I show it as being contributed?  So I should not be showing the disposal date on any of the assets?  Is there a way in ProSeries to ask for a short depreciation period?  I tried Depreciation Options and did not see anything there.

[lyndaj0331]

Thank you for the response.  That is my thinking exactly, but I can't figure out how to show it in ProSeries.  Any suggestions?  Thank you

[IRonMaN]

Enter a sales date in the asset entry worksheet but leave the sales price blank

[lyndaj0331]

I tried that originally, but then it creates a loss

[IRonMaN]

Sales price box left blank, not a zero

[lyndaj0331]

Thank you.  That did it. 

[lyndaj0331]

Thank you for helping me.  Another question.  When I enter the vehicle in the S-Corp, do I use the original cost less accumulated depreciation on the schedule C as my basis and start the 5 years of depreciation over again?

[qbteachmt]

"When I enter the vehicle in the S-Corp,"

Is the car now owned, titled and insured by the S Corp with little to no personal use (which would be taxable through payroll)?

Or, is the car now considered a personally owned vehicle, and your employee-shareholder will be turning in business mileage reports for reimbursement under An Accountable Plan?

[lyndaj0331]

The vehicle is 100% business use.  It is not used personally at all.  It is currently in her name; I have advised her that she needs to transfer the title to the business; however, currently, there is a loan that has not been paid in full as of yet.  The business has been paying all of the expenses.

[qbteachmt]

"currently, there is a loan that has not been paid in full as of yet. The business has been paying all of the expenses."

All of the vehicle operational expenses? The loan doesn't need to be paid off, first. The owner of the vehicle has the asset and that liability, which are part of what is contributed to the corporate entity.

It might be time to find a local mentor, because it seems there might be a list and valuations that need to be reviewed, which is more than can be done over the internet.