Discussion:Real estate passing from decedants s-corp to beneficiaries?
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Discussion Forum Index --> Tax Questions --> Real estate passing from decedants s-corp to beneficiaries?
Scottycoyote (talk|edits) said: | 14 September 2008 |
| ok i know having rental property in an s-corp is a crappy idea but i didnt set it up, im just dealing with it lol. Single shareholder s-corp (shareholder deceased 2005) with 2 pieces of rental property in it, one piece is sold in 2007, the other piece is transferred to the shareholders 3 daughters in november 2007, and im doing the 2007 return.
My question is, do i treat the inherited property as a sale to get it out of the s-corp? If so, is it a sale at fmv, or do i just wash it out (its been depreciated but its not depreciated out). Do the daughters get the step up in basis or get it at adjusted cost basis (theyve continued to operate it as rental property). Im not sure they even did this right in transferring the property out, but i have to deal with it. thanks | |
| 14 September 2008 | |
| The distributed real estate is treated as having been sold by the corporation at fair market value. The shareholders are will recognize a gain or loss (most likely a loss) for the difference between stock basis and the fmv of the distributed property (including cash).
Actually, distributing the real estate to the shareholders shouldn't really have a negative tax effect on the shareholders since they will be able to step-up the basis of their stock to DOD value. | |
Scottycoyote (talk|edits) said: | 14 September 2008 |
| thanks riley for the answer. Just a little clarification so im sure i understand......the propertys fmv is approx 180k, the adj cost basis is about 50k, so the corp would realize 130k gain, which would flow thru to the deceased shareholders estate return? Then the beneficiaries would inherit the stock and experience a capital loss on it which would help offset? The corp is getting closed out for 07. My eyes are crossing here lol. | |
Harry Boscoe (talk|edits) said: | 14 September 2008 |
| I've read the thread a coupla times and I'm not sure we've given the daughters their FMV tax basis in the stock of the S corp that they inherited from the decedent. Doing that can allow them an offset against the gain from the sale of one property and the deemed sale of the other property. The problem may be in getting them - the two sales and the liquidation of the corporation - into the same year... [edited in: they seem to be in the same year, 2007, already.] | |
| 15 September 2008 | |
| Hi as usual need to get the facts right. The guy died in 2005 the 3 daughters/estate get the step up at that dates FMV. The 2007 tax k-1s should flow to whoever owns the stock I would assume the girls have gotten them by now? At any rate whoever owns the stock should get an offsetting loss on the stock step up from 2005. The net tax effect is any appreciation/depreciation from 2005 to 2007 will get reported. You need to make sure as Harry points out that the corp is closed out in 2007 to get the wash. Either the benes or the estate one or the other will report everything not the gain at the estate level and the loss at the bene level. bye | |
Scottycoyote (talk|edits) said: | 15 September 2008 |
| ok talked to my client this am. The stock was not probated but it was supposed to go to the 3 daughters. Thanks for the responses, i see what i need to do now :) | |
| 15 September 2008 | |
| Do not ignore Wes's point. Distribution results in a gain that increases basis. Liquidation produces loss to wash. No liquidation = Taxable income.♫ | |
