transfer of comercial real estate between two related S Corporation

[Naveen Mohan from New York]

I have a client who is sole stockholder in two S corporation. Lets call them corporation A and Corporation B.

 

corporation A owns a commercial real property and he reports it on form 8825.

 

corporation B owns a convenience store and a separate and distinct commercial real estate.

 

He wants to remove commercial real estate from corporation B and transfer it to corporation A and then sell convenience store under corporation B as 100% sale of stock.

 

Can I do a 4797 from corporation B to corporation A where sale price is equal to the adjusted basis of the property that is being pulled out from corporation B and put into corporation A. The reason I am saying is that there really is no arms length sale and no established sale price.

 

Is this transaction OK or am I missing any other tax consequence in this case.

 

Thanks for your help.

 

Naveen Mohan  

[kcjenkins]

It still needs to be treated as a sale.  In fact, you [or your client] need to do some extra work in this situation.  You are not moving "his" property around, those corps are legal entities, no matter that both are owned by the same person.  He needs to pay for a professional appraisal, in writing, from a respected realtor, and then record the sale accordingly.