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grandmabee

351 statement

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I have a schedule C filer who converted to a S-corp in 2019.

the assets are being converted over to the S-Corp. at lower of FMV or adjust basis.

So does the 351 statement get attached to the 1120S return or to the 1040 return?

TIA

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Both the Sch C individual as transferor and the S Corp as transferee will each attach statements.   https://www.law.cornell.edu/cfr/text/26/1.351-3

  • Shareholder receiving stock must file statement with return for the year of the transfer under Treas. Reg. §1.351-3(a)
  • Corporation must file a statement with its return for the year of the transfer under Treas. Reg. § 1.351-3(b)
  • Both must maintain permanent records to determine subsequent gain or loss
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12 hours ago, jklcpa said:

Both the Sch C individual as transferor and the S Corp as transferee will each attach statements.   https://www.law.cornell.edu/cfr/text/26/1.351-3

  • Shareholder receiving stock must file statement with return for the year of the transfer under Treas. Reg. §1.351-3(a)
  • Corporation must file a statement with its return for the year of the transfer under Treas. Reg. § 1.351-3(b)
  • Both must maintain permanent records to determine subsequent gain or loss

Do you know if ATX has this in forms?  I looked in elections and could not find so I guess I must type up from scratch and attach in PDF. In the search I found where it showed you could do it in interview but I don't see it there either.  Maybe another program from Wolters Kluwer.

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12 minutes ago, grandmabee said:

Do you know if ATX has this in forms?  I looked in elections and could not find so I guess I must type up from scratch and attach in PDF. In the search I found where it showed you could do it in interview but I don't see it there either.  Maybe another program from Wolters Kluwer.

I can't answer that because I moved to Drake starting with the 2012 tax year.

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Be careful, if the corporation assumes Sole Prop liabilties which are in excess of the FMV of the Sole Prop assets it will trigger taxable gain,

which happened to a new restaurant client of mine years ago.

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3 hours ago, grandmabee said:

Do you know if ATX has this in forms?  I looked in elections and could not find so I guess I must type up from scratch and attach in PDF. In the search I found where it showed you could do it in interview but I don't see it there either.  Maybe another program from Wolters Kluwer.

ATX has blank elections and blank statements. Use the blank elections to type up the 351 election. There's no need to attach it as a pdf. It gets sent with the return. You can verify this in the Efiled forms tab of the EF Info form.

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9 hours ago, cbslee said:

Be careful, if the corporation assumes Sole Prop liabilties which are in excess of the FMV of the Sole Prop assets it will trigger taxable gain,

which happened to a new restaurant client of mine years ago.

In my case no liabilities.  But if there is shareholder basis doesn't that come into play before taxable.  the distribution (gain) would offset basis and only be taxable if take basis below 0.

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