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What are the tax consequences for transferring assets from incorporated entity taxed as a S Corporation to a LLC with the same owners to separate operations from assets.

hcpa
Level 1

I have an S Corporation that is looking into moving the assets to another llc for liability protection.  The new LLC will have the same ownership as the S Corp.  The sole purpose is to separate the operations from the assets for liability protection.  Are there tax consequences for this?  

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abctax55
Level 15

Assets moving out of a Corp are deemed sold at fair market value.  Probably generating a gain...depending on depreciation taken.

Former Chump..oops..AllStar...I used to be a people person, then people ruined it


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8 Replies 8
PhoebeRoberts
Level 9
Level 9
LLC taxed as what?
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hcpa
Level 1
S Corp
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abctax55
Level 15
:+1:
The phrasing "S corp to *another* LLC is a bit confusing.
Former Chump..oops..AllStar...I used to be a people person, then people ruined it


If a post answers your question, click on *Accept as solution* for future searches
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PhoebeRoberts
Level 9
Level 9
Have the company's attorney structure it as a spin-off type reorg. No tax consequence then.
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hcpa
Level 1
Can you elaborate on what a spin off type reorg means?
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hcpa
Level 1
Can you elaborate on what a spin off type reorg means?
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PhoebeRoberts
Level 9
Level 9
It means "send your client to their business attorney to do a spin-off type reorg." It's not something you can accomplish.

https://www.thetaxadviser.com/issues/2019/may/structuring-divisive-reorganizations.html
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abctax55
Level 15

Assets moving out of a Corp are deemed sold at fair market value.  Probably generating a gain...depending on depreciation taken.

Former Chump..oops..AllStar...I used to be a people person, then people ruined it


If a post answers your question, click on *Accept as solution* for future searches

View solution in original post

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