Loss on sale of former business asset-personal or deductible?

[carolynm]

Client has SMLLC.  He has incurred losses to date, and basically discontinued operating as a business effective 12/31/17.  He wishes to dissolve LLC, and offficially close the business as soon as possible   He has some remaining assets which he intends to sell, hopefully in 2018. 

The assets will probably be sold at a loss.  Will the loss be deductible if the asset has been converted to personal use?

 

 

[Lee B]

Depends on depreciation, if they come out at FMV, I have had gains before in this situation.

[carolynm]

This is a sole member LLC so there is no transaction to transfer them to the individual.

I'm pretty sure the basis will flow through to the individual,  my issue is whether this becomes a persona asset at the time of conversion and therefore future losses become non-deductible or if the asset retains it's "character" and is still a business asset.

 

[BulldogTom]

Don't close the LLC until the assets are sold.   Problem solved.   They still belong to the LLC until is closes, and it should not close until the assets are sold anyway.   Sales of company assets is as good a reason as any to hold the company open.   It is obvious that the owner of the LLC does not want them, so why distribute to him? 

JMHO

Tom
Modesto, CA

[DANRVAN]

53 minutes ago, BulldogTom said:

Don't close the LLC until the assets are sold.   Problem solved.   They still belong to the LLC until is closes, and it should not close until the assets are sold anyway.   Sales of company assets is as good a reason as any to hold the company open.   It is obvious that the owner of the LLC does not want them, so why distribute to him? 

JMHO

Tom
Modesto, CA

That doesn't make any difference.  The LLC is a disregarded entity for tax purposes. They don't become personal assets unless they are used as such, otherwise loss allowed on 4797.