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Business Structures
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Transferring Property Into a Corporation-Continued
Basis:
Once the corporation has been formed and you have all the documents you need to execute the legal transfer of property into the corporation, the next issue is the valuation of the property included in the exchange.
The value of property in tax lingo is referred to as basis.
Why Know Your Basis in Property?
Determining the property's correct basis is important because it is used in figuring gains and losses and to calculate depreciation and amortization.
S-corporation shareholders may deduct S-corporation losses, however, the amount of the deduction is limited to the adjusted basis of the shareholder's stock plus the shareholder's loan basis.
Accurate records must be kept and retained for such property until at least three years after the property is disposed of.
When discussing property valuation, certain tax-terms must be understood.
This is the starting point for valuing property. This is your original cost, or simply, your basis.
It includes:
- Cash paid for the property.
- The fair market value of property you gave up to acquire the property.
- Liabilities assumed by you from the seller.
- Taxes you paid, such as sales tax.
- Shipping costs, including insurance you paid.
- Installation costs to put the property in service.
- Costs to test the equipment.
- Any other costs associated with the initial purchase.
Next:
C-corporations-Transferring Property Into A Corporation -Continued: Adjusted Basis; Fair Market Value
Related Links
- Transferring Property Into a Corporation
- Documents Used to Transfer Property Into a Corporation
- Leasing and Licensing Property to a Corporation
- Opening a Corporate Bank Account
- Valuation of Property Transferred Into a Corporation
- Section 351(a)-Tax-Free Exchange
- Section 351(b)-Partially Taxable Exchange
- Section 1244 Losses on Small Business Stock
- Who May Claim an Ordinary Loss on Section 1244 Stock?
- Deduction Limit for Section 1244 Stock
- Sole Proprietorship
- Partnership
- S-corporation
- Limited Liability Company (LLC)
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