We Prepare Tax Returns!

We prepare most type of tax returns:


S Corporation.

C Corporation.




Client Video Testimonials

Click here to watch some of our clients in their video testimonials!

Client Testimonials

"Gary does a great job on finding expenses for my rental properties. His virtual office makes tax time a lot more convenient. I added him to Angie's list!"—Molly Baxter

Molly Baxter

Free Consult

Even though Gary enjoys helping colleagues, we no longer provide free consults to other tax preparers. He's happy to consult on an hourly billing basis if our schedule allows.

Pay Your CPA

Enter $ Below
Other Amount:
Your Email Address:

Subchapter S Corporation CPA discusses Property Distributions | Form1120S Tax Preparation

Subchapter S Corporate CPA discusses proptry distributions.

Proactively planning non-standard transactions in a Subchapter S Corporation is prudent. (910) 399-2705

Subchapter S Corporations are usually have only a few shareholders.  Property often passes from the S Corporation to the shareholders.  Technically cash is property, but let’s make it interesting with a IRS Form 1120-S example utilizing land.  The main point is to consult with your CPA before committing the S Corporation to a non-standard transaction. Things get tricky fast. As in all our examples, we’ll use Subchapter S Corporation CPA, Inc., as our demo S Corporation.  The tax implications of Form 1120-S are stressed below and we assume the transaction makes sense for both Subchapter S Corporation CPA, Inc. and the Shareholder.

Basic Scenario

One Shareholder of Subchapter S Corporation CPA, Inc. wants a piece of corporate owned land.  SSCC  bought the  5 acres of land years ago, as an investment, for $300,000.

Land Worth $250,000 at time of transfer – $50,000 Loss

Generally, distributions of loss property should be avoided in S Corporations, at least from a tax perspective.  Here’s why. Subchapter S Corporation CPA, Inc. doesn’t ever get to take the $50,000 loss on the IRS Form 1120-S.  It can only take a loss if the it sells the land.  But the Shareholder’s basis in the land would have been the $250,000 FMV. So the $50,000 loss on the transfer never benefits the Shareholder either.

Land Worth $350,000 at time of transfer – $50,000 Gain

Essentially the IRS treats this transfer like a sale of the land to the shareholder at FMV. The tax consequences for the land are the same if Subchapter S Corporation CPA, Inc. sells the land to a Shareholder and he/she disposes of it, or SSCC sells it and distributes the cash to Smith.  Assuming it can be sold.  At the time of transfer, the S Corporation recognizes a gain of $50,000.  Form 1120-S allocates this gain to the Shareholder’s basis, through the Form 1120-S Schedule K-1 according to the percentage of Subchapter S Corporation CPA, Inc. they own.  Simultaneously, the shareholder’s basis reduces by the entire $350,000, but not below $0.

“Documenting Fair Market Value (FMV) at the time of  transfer is crucial if the S Corporation or shareholder is audited.”
– Gary Bode S Corporation CPA and Form 1120-S Tax Accountant

Moral of the Story

In S Corporations, the tax consequences of non standard transactions on Form-1120S deserve proactive consideration with your CPA.

I’m a Subchapter S Corporation CPA because my firm operates as an S Corporation. So I devote considerable time, including S Corporation related Continuing Professional Education to stay current on new issues. And our virtual office means we can serve your S Corporation wherever it is. Need a free consult? (910) 399-2705.

Find me on Google+

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>