Conversion from C to S corp with assets?


M

mark

I goofed and missed the deadline for submitting my S corp
declaration and thus my corporation has revenue for 2004
earned under C.

I haven't yet filed a 2004 return and I think I'm entitled
to capitalize the corporation with computer equipment,
customer lists, goodwill and software that I could value at
perhaps $25000.

My CPA indicates some challenges in converting from C corp
to S corp with something like this on the books as assets,
but is that worse than taking $25000 as ordinary income or
taking a dividend that is double-taxed?

Any advice is welcome! Thanks.
 
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H

Harlan Lunsford

I goofed and missed the deadline for submitting my S corp
declaration and thus my corporation has revenue for 2004
earned under C.

I haven't yet filed a 2004 return and I think I'm entitled
to capitalize the corporation with computer equipment,
customer lists, goodwill and software that I could value at
perhaps $25000.
You don't give any history of the corporation, thus it
appears that you started this corporation and did not
purchase it, or any assets from another business.

One can't just (excuse the term:) "make up" a value to put
on the books. Sure, equipment that was purchased goes on
the books at the value paid for it; also any purchased
software.

But today, I can't just come up with a value for my
goodwill and customer lists and add that to my corporate
assets. Your accountant (you say he's a CPA; are you sure?)
should be able to explain these things to you. In fact your
situation may just be one more argument for getting a
qualified accountant involved before you even kick off the
business. We see it all the time.
My CPA indicates some challenges in converting from C corp
to S corp with something like this on the books as assets,
but is that worse than taking $25000 as ordinary income or
taking a dividend that is double-taxed?
There's no problem in converting to an S corp, but sounds
like you'll not be able to do it till next year, i.e. 2006.
Too late for this year, and certainly too late for year
2004.

Conversion doesn't depend on what's on the books, rather on
how those items are treated taxwise. He's really saying
you can convert income to assets and escape taxation,
whether a regular corporation or an s corp.

There's food for thought.

ChEAr$,
Harlan Lunsford, EA n LA
 
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T

Thomas Healy

I goofed and missed the deadline for submitting my S corp
declaration and thus my corporation has revenue for 2004
earned under C.

I haven't yet filed a 2004 return and I think I'm entitled
to capitalize the corporation with computer equipment,
customer lists, goodwill and software that I could value at
perhaps $25000.

My CPA indicates some challenges in converting from C corp
to S corp with something like this on the books as assets,
but is that worse than taking $25000 as ordinary income or
taking a dividend that is double-taxed?

Any advice is welcome! Thanks.
Ask your CPA about making a late election. There are
procedures that can help, especially as you haven't yet
filed the return.
 

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