S CORP

[TAXMAN]

Have a 2 person S Corp that recently sold out to 3rd party. Sold all assets for stated price. 5 year note. S Corp was reporting on installment sale and showing this on K-1's to the 2 parties. Subsequent outside audit of S-Corp turned up about 10k of equipment,supplies, ect along with interest that somehow never made it to the S-Corp books. Don't know why I guess just sloppy record keeping. Question is: Do we amend for all this stuff and correct the installment sales basis and send out new k-1S. We are dealing with the sale occurring in Dec 04 and payments being received 05,06,07,08.

Any thoughts on this?

Many thanks.

[jainen]

>>S Corp was reporting on installment sale and showing this on K-1's<<

How's that work? Did the corporation sell itself? Liquidating? How did the sales agreement define "all assets"?

>>Subsequent outside audit of S-Corp turned up about 10k of equipment,supplies, ect along with interest that somehow never made it to the S-Corp books<<

How's that work? Who was auditing and why? Weren't supplies etc. already expensed? What kind of an asset is interest?

>>correct the installment sales basis<<

How's that work? Having reported the installment basis for three years, they have established an "accounting method" that can't be changed without IRS consent. I would suggest that you don't want to bring any of this to the attention of the IRS. Especially if the "stated price" covers depreciation to be recaptured, inventory, or other assets not eligible for capital gain treatment.