Multi Member LLC

[mircpa]

Hello friends

This is follow up to previous thread which was posted by me. Have a client who floated multi member LLC principally to own/lease commercial real estate. Operating agreement, form 8832 entity classification to be classified as association taxable as a corporation and form 2553 sub chapter s election was prepared by attorney. My question at end of year i would be filing forms 8825/1120S/4562/K1. Correct me if i am wrong. Seller provided a closing statement that shows a lumpsum amount of property, does anybody knows how to allocate sales proceeds between land, building and equipment?

One another concern which i have is officers compensation, member/owners are reluctant to pay themselves, any thoughts on this

thanks to all who responds

[OldJack]

Keep in mind that the net of form 8825 does not appear on page 1 of the 1120S and limitations on losses may apply.

Land should be allocated at Fair Market Value first. There may have been an independent appraisal done by the seller before placing on the market. Real Estate tax system for that area may have a FMV assessment.

Then deal with the balance of the purchase price by allocating the total purchase price (less land) to the percent of FMV of each item as to the total/gross FMV (less land) of allocated items. In other words after subtracting out land cost (based on FMV) determine each item's FMV as a percent of total FMV (not counting land FMV) and multiply that resulting item percent by the balance of the purchase price to determine cost allocated for that item.

If the owners are not taking distributions or any other payments during a year from the S-corp they need not take a salary as it is those payments that the IRS has authority to reclassify. The IRS does not have authority otherwise to demand a S-corp shareholder take a salary.

edit: there are those that would not separate FMV land first, but would include it as the same as any other item in the allocation. I could argue that as being correct also.