How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Lane Your Own Question
Category: Finance
Satisfied Customers: 9696
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Type Your Finance Question Here...
Lane is online now
A new question is answered every 9 seconds

S Corp.... Sole Member took car out of company to give to

Customer Question

s Corp.... Sole Member took car out of company to give to his daughter. I'm doing the "sale of asset" to take off the books. How is the distribution done, or is that construed as his distribution?
Submitted: 6 months ago.
Category: Finance
Expert:  Lane replied 6 months ago.
IF nothing is received for the car, then this is a gift....And the thing to remember when giving property to family members is that there are rules that apply to gifts of depreciated capital assets:...The real tax implications (future implications) are for the daughter:...If the market value of the gift is less than the donor’s cost basis, the donee must use the donor’s cost basis for determining any future capital gains; not the gifted value of the asset....If the asset is sold by the donee for less than the gifted value, the capital loss is the difference between the gift value and the sales price, not the donor’s cost basis....If the asset is sold for an amount between the gifted value and the donor’s cost basis, there is neither a gain nor a loss....For the S-Corp owner, this is just a distribution - a lowering of the capital account and his basis in the S-Corp....If you use a General Journal entry, the debit is to retained earning and the credit is to Cash....If you write a check, make sure the "expense" points to the retained earnings account in the equity section of the chart of accounts. ...In either case, only Balance Sheet accounts are used. There are no Income Statement accounts involved.
Customer: replied 6 months ago.
but, to take it off the books, should I not do it as a deemed sale?
Expert:  Lane replied 6 months ago.
No ... It's a gift....A deemed sale for 0$ would create a contrived tax loss....Just treat it as a distribution ...Replace cash (in the distribution example above) with the asset being distributed, the car....Debit retained earnings (or owners capital, if you don't use retained earnings because this is a passthrough) and credit the asset.
Expert:  Lane replied 6 months ago.
DId you see my answer?

Related Finance Questions