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My Name is ***** ***** Stevenson CPA, and I do not know how…

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My Name is *****...

My Name is ***** ***** Stevenson CPA, and I do not know how to handle this situation. I am preparing a final return for an S Corp, which was previously a C corp with C corp retained earnings. What are the tax consequences of closing a S corp with C corp retained earnings on the Balance Sheet?

Accountant's Assistant: Thanks. Can you give me any more details about your issue?

The C Corp elected to be an S corp 3 years ago, now they want to file a file a final return for the S Corp. What happens to the amount shown as prior C corp retained earnings?

Submitted: 2 years ago.Category: Tax
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Answered in 53 minutes by:
1/27/2016
Tax Professional: Lev, Tax Advisor replied 2 years ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,860
Experience: Taxes, Immigration, Labor Relations
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Only tax consequences is there is BIG - built-in-gain retained by the S-corporation.

In this case - distribution of assets to shareholders is treated as the sale - and built-in gain is realized on the corporate level.

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Tax Professional: Lev, Tax Advisor replied 2 years ago

Otherwise - there is no difference. Distributions to shareholders would be treated as sale price of corporate shares (and that includes prior retained earnings from C-corporation) - so shareholders will calculate a gain or loss depending on their basis in corporate shares.

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