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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
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Experience:  Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
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SCorp filed final year T/R in 2012. Zero icome, small loss

Resolved Question:

SCorp filed final year T/R in 2012. Zero icome, small loss due to misc expenses, company has been inactive for a couple of years, but is just now filing a final return. In looking over the return there is still a small amount remaining on the B/S, pg 4, for Depreciable Assets and A/D, fully depreciated. What, if anything, do I need to do with this?
Submitted: 6 months ago.
Category: Finance
Expert:  Megan C replied 6 months ago.

Megan C :

Thanks for your question, and thanks for using JustAnswer.com. The depreciable assets that are left over, are deemed sold.

Megan C :

At the end of the day, you want the balance sheet to be completely zeroed out in the final return.

Megan C :

The shareholder will recognize gain on the sale of the assets, which in turn raises their basis in the stock.

Megan C :

Simple example: assume shareholder contributes $1,000 to S corporation. Assume S corporation takes the $1,000 and buys a depreciable asset. In year 1, S corporation takes a $1,000 depreciation deduction which passes out to shareholder and reduces the shareholder's basis to zero. In year 2, S corporation liquidates and distributes the asset to the sahreholder. Assuming the asset has a $1,000 FMV, the distribution will be treated as a "deemed" sale of the asset for $1,000. The deemed sale will result in $1,000 gain (basis of asset is zero) and this gain will increase the shareholder's stock basis from zero to $1,000. The liquidating distribution is treated as payment of $1,000 in exchange for stock that has a basis of $1,000 (i.e., a "deemed" sale of the stock). So, in this simple example, the liquidation produced a $1,000 gain from the deemed sale of the asset and no gain or loss from the deemed sale of the stock. The shareholder's basis in the asset equals the $1,000 FMV and the shareholder has a tax liability on the $1,000 gain with no cash from the deemed sale to pay the tax

Megan C :

If the amount is small, then there's probably not much effect on the taxpayer. Just make sure you completely zero out the balance sheet in the final return.

Customer:

The CPA marked the 2012 return as final, but there was still a small amount of cash and the assets I've already mentioned. $500 in capital stock and small R/E. In early 2013, we closed out the bank account and deposited the cash in the S/H's personal account. Should we file again in 2013 for another "final" return?

Megan C :

You're talking such small dollars I wouldn't mess with it.

Megan C :

If anything, you would amend the final return, not file a new one

Customer:

Ok, that must have been what the CPA was thinking. More trouble than it was worth, so to speak.

Megan C :

Yes, you're talking very small dollars. Now, if it were several thousand dollars I would fix it

Customer:

Thank you.

Megan C :

You're welcome.

Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 10386
Experience: Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
Megan C and other Finance Specialists are ready to help you
Expert:  Megan C replied 6 months ago.
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