Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

This answer was rated:

I have an LLC taxed as an SCorp. At the end of the year 2…

I have an LLC taxed...
I have an LLC taxed as an SCorp. At the end of the year 2 shareholder A has the following basis:
Stock basis -0-
Debt basis 22,615 (Principal amount of debt $91,205)During Year 3 Shareholder A pays himself back $4,500 of the loan bringing the loan balance to $86,705.If the remaining loan balance of $86,705 is transferred to paid-in capital in Year 3 what are the tax consequences to Shareholder A?Because it is not being paid back but is being transferred to equity, does it have to be reported on line 16 code E "repayment of loans from shareholder" on the K-1 and he pick up the recognized gain of $65,205?
Show More
Show Less
Ask Your Own Tax Question
Answered in 1 hour by:
3/13/2018
PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 5,008
Experience: 35 years tax experience, including four years at a Big 4 firm.
Verified

Hi from Just Answer. I'm PDtax, and can assist.

Ask Your Own Tax Question

This can be done this way, which will be tax free. It is the same as contributing the cash, then paying off the debt. Which is also tax free, since you will have basis all through the transaction.

Of course, the ending shareholder basis will be $18,115. But there is no tax due on the recapitalization.

Thanks for asking at Just Answer. P{ositive feedback, five stars being best, ***** ***** appreciated. A bonus is welcomed if warranted. I'm PDtax.

Ask Your Own Tax Question
Customer reply replied 1 month ago
Do I show the the $86,705 on line 16 code E "repayment of loans from shareholder" on the K-1?Even though he has a reduced loan basis of $22,615 (because he's taken losses of $68,590), transferring the loan balance of $86,705 to paid-in capital does not trigger gain recognition?And how do I show this change on the Year 3 basis schedule I'm sending to his personal CPA? Please see the Year 2 basis schedule attached..

The s corp does not report loan repayment in this instance on the k-1.

Ask Your Own Tax Question
Customer reply replied 1 month ago
I asked this in the previous question but didn't get a response:
And how do I show this change on the Year 3 basis schedule I'm sending to his personal CPA? Please see the Year 2 basis schedule attached.I'm having trouble, in my tax program (Lacerte), getting the loan principal transferred to PIC to not appear on the basis schedule without showing the distributions on the K-1.

I don't use Lacerte, but I would try to add the assumed cash contribution to basis, then repaying the loan. That should do what you want, and not generate a taxable repayment below at risk.

Try this way, and see if you get better results.

Thanks again for asking at just answer. Positive feedback is appreciated. I'm PDtax.

PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 5,008
Experience: 35 years tax experience, including four years at a Big 4 firm.
Verified
PDtax and 87 other Tax Specialists are ready to help you
Ask your own question now
Was this answer helpful?
Ask PDtax Your Own Question
PDtax
PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 5,008
5,008 Satisfied Customers
Experience: 35 years tax experience, including four years at a Big 4 firm.

PDtax is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,338 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,451 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

56 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,124 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

< Previous | Next >

Related Tax Questions
PDTax need assistance. On a 1041 there is a Decedent's
PDTax need assistance. On a 1041 there is a Decedent's Estate Created at time of death. First year of death 2016. A final 1040 return was filed for year of death 2016. There was a RVOC trust created i… read more
Dr Arthur Rubin
Dr Arthur Rubin
Doctoral Degree
24 satisfied customers
I have a 2 person LLC. During the 2017 tax year I took out a
I have a 2 person LLC. During the 2017 tax year I took out a business line of credit for the LLC. Some of that money was used to pay personal expenses of one of the members. Is that money considered t… read more
Carter McBride
Carter McBride
LLM
966 satisfied customers
I have a newly formed LLC but have a very high personal
i have a newly formed LLC but have a very high personal income, should i file as a C corp? … read more
Carter McBride
Carter McBride
LLM
966 satisfied customers
It is in regards to accounting... what is a transaction
it is in regards ***** ***** what is a transaction report? is for expenses that get reported each year to an accounting firm for tax reconciliation and filing business taxes... … read more
ABC Accounting Group
ABC Accounting Group
Bachelor\u0027s Degree
828 satisfied customers
If I am converting an LLC taxed as a partnership to be taxed
Quick question. If I am converting an LLC taxed as a partnership to be taxed as an s corp, would the 1065 for the year prior to the switch be considered a final even though I will be using same ein fo… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
LLC loss profit distribution. It's a 4-member LLC, profits
It's a 4-member LLC, profits are shared, not losses. How the distribution should be reported?… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
2,064 satisfied customers
In the past i made the mistake and had shareholders issue
in the past i made the mistake and had shareholders issue themselves a 1099.. i have no idea why i didn't know this wasn't acceptable as compensation but i am surely learning to say the least... what … read more
PDtax
PDtax
Certified Public Accountant (CPA)
5,008 satisfied customers
P Corp distributed to its sole shareholder land worth
P Corp distributed to its sole shareholder land worth $50,000. The land had a basis of $40,000 and was subject to a mortgage of $80,000. How much gain must P recognize on the distribution of the land?… read more
Carter McBride
Carter McBride
LLM
966 satisfied customers
For an S Corp, if the shareholder distribution is in excess
Hi Carter,For an S Corp, if the shareholder distribution is in excess of the shareholder's stock basis, this is treated as gain from the sale or exchange of the underlying stock; however, can you tell… read more
Carter McBride
Carter McBride
LLM
966 satisfied customers
I am a shareholder for an S-Corporation. I use a personal
I am a shareholder for an S-Corporation. I use a personal vehicle for business expenses. Am I to use Schedule C or Schedule A on my personal taxes to deduct the business miles? … read more
Carter McBride
Carter McBride
LLM
966 satisfied customers
I have an S corporation with two shareholders, same persons
I have an S corporation with two shareholders, same persons are the only employees if the S corporation. The corporation leases vehicles for the shareholders employees. The leased vehicles are both us… read more
Carter McBride
Carter McBride
LLM
966 satisfied customers
100% S Corp shareholder distributed a vehicle to himself.
100% S Corp shareholder distributed a vehicle to himself. Original cost 59711, A/D 54073, note 48313. He used the vehicle as a trade in for a personal vehicle. I would like 1120 S and k-1 assistance.… read more
taxmanrog
taxmanrog
Master\u0027s Degree
903 satisfied customers
I have a shareholders distribution based on business sale -
I have a shareholders distribution based on business sale - I don't know where to report on my taxes … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Can the sole owner of an LLC in PA. be held personally
Can the sole owner of an LLC in PA. be held personally responsible for unpaid property and school tax on vacant land owned by the LLC. LLC does not have money to pat taxes and probably won't. … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
2% shareholder insurance - If a 100% Shareholder is on
2% shareholder insurance - If a 100% Shareholder is on payroll and he has an insurance policy but spouse is on Medicare, is the amount of the insurance premiums of owner plus the Medicare that was wit… read more
Carter McBride
Carter McBride
LLM
966 satisfied customers
Is income from an LLC passed through to personal tax return
Is income from an LLC passed through to personal tax return considered earned income, enabling me to contribute to a traditional IRA?… read more
abci168
abci168
Principal
27 satisfied customers
I am an owner of an LLC. I will take distributions through a
I am an owner of an LLC. I will take distributions through a schedule K1 pass through. I also receive W2 income from an employer and 1099 income. Will I be able to fully depreciate a qualifying truck … read more
PDtax
PDtax
Certified Public Accountant (CPA)
5,008 satisfied customers
Can my LLC with US and Foreign members be a shareholder in
Can my LLC with US and Foreign members be a shareholder in an S Corporation? The K-1 would go to the LLC.… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,124 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x