Asset transfer between S-Corps

[LouD]

Client has 2 100% owned S-Corps. In 2009, one of the S-Corps closed it's doors and it's only asset, a trailer, is now being used by the other S-Corp. Since the transfer happened between 2 corporations with the same ownership structure, can that be done on a tax-free basis without having to show a deemed sale on the closed S-Corp and corresponding asset contribution to the remaining S-Corp?

If it is possible, how do I handle it on the closing S-Corps final return?

Thanks for any help or guidance!

[Margaret CPA in OH]

A quick check might be to see if the trailer is fully depreciated. If so, it can be abandoned by the defunct corp and acquired by the remaining corp as a fully depreciated asset. That's all my brain can handle now. Back to 1099's, etc.

[OldJack]

A quick check might be to see if the trailer is fully depreciated. If so, it can be abandoned by the defunct corp and acquired by the remaining corp as a fully depreciated asset. That's all my brain can handle now. Back to 1099's, etc.

I disagree with abandoned and acquired at fully depreciated value. There are basically 2 ways to transfer:

1. Tax-free reorganization under code sec. 361.

These corporations are related parties and a transfer under code sec. 361 would require a "step into the shoes" tax basis. Also there is the "anti-churn rules [under code sec. 168] for MACRS depreciation that would not allow a different depreciation basis.

2. Liquidation/deemed sale with contribution under code sec. 351.

If Liquidation/deemed sale from the corporation to the individual, then distribution/sale to the individual would have to be at FMV with the liquidation corporation recognizing taxable gain/loss passed to the individual for 1040 taxes. The individual pays taxes and contributes the asset under code sec. 351 for stock at FMV.

[Margaret CPA in OH]

I knew there would be some wonderful person who would provide other details and suggestions. Thanks, OldJack. My offering was just off the top without research or careful consideration of all aspects. I will go back to my cave now...