On to 2010 planning

[imjulier]

Moving on from filing to 2010 planning about 2 weeks too early in my opinion. Needing to know if clients can change from S corp to sole prop tax-free, same as going from sole prop to s-corp? I know they don't have any BIG (built in gains) tax issues becasue there is only a car in the business that they are going to "distribute" to the owner while its still an s-corp. Any knowledge, thoughts, ideas?

Thanks,

Julie

[Lion EA]

The short answer is you can go up the entity ladder with tax free contributions, but going back down the ladder requires distributing the assets to the shareholders at FMV and dissolving the corporation. So, usually a gain to the corporation on assets that were depreciated, gain passing through to your S shareholder. Try TTB or other quick answer book on dissolving a corporation for an overview and cites to more extensive research. With only one asset, it might not be much of an issue. Make sure you check with your state on what they need re the dissolution; forms are probably on your secretary of the state's web site.