S-Corporation Basis Question - Tilted Forum Project Discussion Community

marcsantoli · 10-12-2004, 11:27 AM

I recently started a new s-corp (i posted on here about it before). I have a ton of equipment that I previously purchased using my own money to give to the corporation (i am the only shareholder) I have read that this will increase my basis in the corporation as the equipment has a value. My question is, is it possible to have a loss on this year's tax return from my business because now the business owes me the money for that equipment?

if so, once the business picks up next year can the corporation pay me back the "loan" for the equipment without any tax consequences for myself.

if anyone needs more clarification please let me know.

THanks,
--marc

BonesCPA · 10-12-2004, 01:11 PM

Briefly:

If you "sell" the equipment to your corporation in exchange for a loan, then you can depreciate the equipment over their useful lives. Used equipment can not take Section 179 depreciation. (If that is Greek - talk your your tax advisor.) The loan to the corporation is not income when the funds/equipment are received. Likewise, when the loan is paid back it is not a deduction.

eg. You loan the corporation $10,000 to purchase office supplies, postage, etc. (Similar to your situation, but let us assume this is all immediately dedcutible.) The corporation has no other income or expense during the year, you will have a $10,000 loss that will pass through to your personal return.

Year 2 you have $25,000 of income and no expenses. You pay back the loan and still have $15,000 sitting in your account at the end of the year. Your taxable income would be $25,000 since paying back the loan is not deductible. (Ignore interest on the loan, etc.)

Summary:Yes, you can have a loss based on tranferring the equipment to the corporation in exchange for a loan, but no, there is tax consequences for paying back the loan since there is no deduction for the loan payment.

marcsantoli · 10-12-2004, 05:45 PM

Thanks so much, I finally understand it all!!!

Well not all, that's for my accountant, but at least I understand this.

--Marc

gar1976 · 10-12-2004, 06:17 PM

Your basis will equal (more or less) any contributions (cash, loans, or market value of assets) plus or minus any net income/loss incurred, less any previous distributions.

Sooo....

You can lose and deduct up to what you put into/loan the S Corp, and the rest of the losses become "suspended" until you have basis to deduct them against.

10-12-2004, 11:27 AM	#1 (permalink)
marcsantoli Upright	S-Corporation Basis Question I recently started a new s-corp (i posted on here about it before). I have a ton of equipment that I previously purchased using my own money to give to the corporation (i am the only shareholder) I have read that this will increase my basis in the corporation as the equipment has a value. My question is, is it possible to have a loss on this year's tax return from my business because now the business owes me the money for that equipment? if so, once the business picks up next year can the corporation pay me back the "loan" for the equipment without any tax consequences for myself. if anyone needs more clarification please let me know. THanks, --marc

10-12-2004, 01:11 PM	#2 (permalink)
BonesCPA No. It's not done yet. Location: sorta kinda phila	Briefly: If you "sell" the equipment to your corporation in exchange for a loan, then you can depreciate the equipment over their useful lives. Used equipment can not take Section 179 depreciation. (If that is Greek - talk your your tax advisor.) The loan to the corporation is not income when the funds/equipment are received. Likewise, when the loan is paid back it is not a deduction. eg. You loan the corporation $10,000 to purchase office supplies, postage, etc. (Similar to your situation, but let us assume this is all immediately dedcutible.) The corporation has no other income or expense during the year, you will have a $10,000 loss that will pass through to your personal return. Year 2 you have $25,000 of income and no expenses. You pay back the loan and still have $15,000 sitting in your account at the end of the year. Your taxable income would be $25,000 since paying back the loan is not deductible. (Ignore interest on the loan, etc.) Summary:Yes, you can have a loss based on tranferring the equipment to the corporation in exchange for a loan, but no, there is tax consequences for paying back the loan since there is no deduction for the loan payment. __________________ Back into hibernation.

10-12-2004, 06:17 PM	#4 (permalink)
gar1976 Custom User Title Location: Lurking. Under the desk.	Your basis will equal (more or less) any contributions (cash, loans, or market value of assets) plus or minus any net income/loss incurred, less any previous distributions. Sooo.... You can lose and deduct up to what you put into/loan the S Corp, and the rest of the losses become "suspended" until you have basis to deduct them against. __________________ Blistex, in regards to crappy games - They made pong look like a story driven RPG with a dynamic campaign.

10-12-2004, 05:45 PM	#3 (permalink)
marcsantoli Upright	Thanks so much, I finally understand it all!!! Well not all, that's for my accountant, but at least I understand this. --Marc