unclear on Estate vs S corp vs Personal - help please

[WITAXLADY]

so I am going to whine first - between the IRS letters - need W-2, need 1099-R - should have been sent e-file, or at the least on file and should be with the  IRS records! I am finally tackling some of the messier returns...

client has S corp trucking business - dies in truck accident, have filed for EIN for Estate for personal, etc..

Vehicles are sold - final S corp -

Where do truck sales go? after his passing...

An estate return is not filed for the corp as finished with his death?? or do the vehicles belong to the S corp? Disposition and income?

And where does the insurance money go? Taxable income?

My brain is fried - point me to a Pub if you do not want ot answer as this is such a stupid question but I cannot figure it out

I know what to do with houses, stocks, rentals, etc but this has me spinning. Please..

thank you

D

and of course dealing with distant family members so the information is so hard to get..

[Lynn EA USTCP in Louisiana]

How were the trucks titled? If to the S corp the sale is on the S corp return. If to the deceased on the estate income tax return. The deceased' sow ership ends day of death (or is it day after?), so if he was the only S/h there will be 2 k-1's - one for 1/1-daate of death and the second to the estate day after death to 12/31.  Hope this helps. 

 

 

 

[DANRVAN]

The S-corp stock will go to his estate which will get a stepped up basis for the value of stock on date of death.  Basically estate will report a gain from sale of assets by S-corp and offsetting loss from liquidation of S-corp.  These two transactions must take place in the same tax year.

 Here's how it works.  Assume only asset is truck with fmv of $50,000 on DOD and fully depreciated. So basis of stock to estate is $50,000. 

Next truck is sold for $50,000 so gain of $50,000 is passed through to estate and increases basis of stock to $100,000 ($50,00 + $50,000)

Then S-corp is liquidated in the same tax year and estate receives $50,000 for stock with basis of $100,000.  So capital loss of $50,000.

On  tax return, estate reports capital gain of $50,000 and offsetting capital loss of $50,000.

Hope this helps!

[DANRVAN]

In above post I overlooked the fact that the truck was wrecked on DOD.  Assume salvage value was $10,000 and S-corp receives $40,000 insurance claim.  I believe the fmv of the stock on DOD would include the $40,000 insurance claim S-corp was entitled to, although not yet filed or determined.  

Therefore the basis of stock to estate would be $50,000 ($10,000 +  $40,000) in this example.  So estate would also report $50,000 gain  from K-1 on disposal of asset and $50,000 loss from stock liquidation.

[WITAXLADY]

thank you! D