Convert from sole prop to S-Corp

[cientax]

Potential client is sole prop and is wanting to convert to S-Corp. Has about $110K in depreciable assets used while self employed but now wants to use them in S-Corp when he converts.

Is he to transfer the assets directly or is the S-Corp to purchase the assets?

Is the basis to remain the same if a direct transfer occurs or will the basis be the purchase amount if the S-Corp is required to purchase the assets?

The individual purchased the assets in 2006 as sole prop and deducted Sec 179 on these assets, he would have to recapture the Sec 179 on his personal 1040 return in disposing of the assets.

Could the S-Corp use Sec 179 again for 2007 where it would flow through the K-1 to the shareholders?

[Evan S. Golar]

Read the rules of Section 351 incorporations.

That would give you the answers you're looking for.