S-Corp Asset Disposal

[Terry D EA]

An S-corp is in the process of selling off assets to pay it's vendors and eventually will probably dissolve. The assets in the company are numerous and I am in the process of calculating the gain/loss on the sales as well as removing them from the books. Many of these assets have been sent to the dump. What happens to the remaining depreciation on "leaseholds" mostly for building repairs. The building has a strong buyer at this time but as I mentioned in other posts, the building is not owned by the S-Corp. But, the S-corp paid for any building repairs. The only depreciation that has been taken on the building is the actual acquistion cost by the owner of the building who is of course the same owner of the S-Corp. What a mess

[jklcpa]

The owner of the building (the single-owner LLC) will report the sale of the building without taking into account those improvements made by the S corp tenant. As long as the S corp continues to occupy the building, the leasehold improvements should stay on the fixed asset schedule. Those improvements will be written off as abandonements when the S corp vacates the building as an ordinary loss. It will be part of the flow-through on the K-1.

[jainen]

>>What happens to the remaining depreciation on "leaseholds" mostly for building repairs.<<

Presumably "buidling repairs" have already been deducted! If they were actually leasehold improvements depreciation was allowed/allowable for the tenant. Normally when a lease terminates remaining depreciation can be taken as a loss, but since in the original post it is the same owner, I believe the loss must be suspended for the S-corp and subsequently reduce gain on the building sale itself. "Eventually will probably dissolve" doesn't sound like you can use the rules for complete liquidation.

[Terry D EA]

My take was exactly what Judy said. I am taking your comments Jainen under consideration and will study the "complete liquidation rules". At this time, the owner is undecided as to the final outcome of this business. In my opinion, and only because I know all of the circumstances, to dissovle this business is the best thing to do. As I said, there is a buyer for the building ready to make an offer and once the building is sold there maybe some options of utilzing an office for the owner to continue to broker recyclable raw products, but it doesn't seem like that will happen.Thanks for the replies