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February 22, 2023
Question

1120s question

  • February 22, 2023
  • 1 reply
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I am not a first time TT user.  Can I still ask a question? --Richard

    1 reply

    February 22, 2023

    Yes, of course.

    February 22, 2023

    I have used TurboTax Business for 2 decades.  I have filed an 1120s for my single owner S-Corp business every year for 22 years.  On June 30, 2022 I retired and sold the business to an employee for $50,000.    I entered in June 30th as ending date for my 100% ownership and start date for my successors 100% ownership.  When I enter in the info in TurboTax for the income the business had in the first 6 months of 2022 it generates the K-1 and divides the income in half.  All of the income is mine though.   The new owner is not going to file an 1120s and is instead going to go with a single member corporation and bring the income over to Schedule C instead of a K-1.  So if I enter in that this is the last business filing then TurboTax says the Form 8594 won’t be generated, but it is my understanding that both seller (myself) and buyer have to file this 8594 that breaks down the acquisition cost by category.   I did print his form and provide it to him already.  If I change ownership change date to 12/30/22 then the income shows as 99.72% mine and .28% his.  I can live with the few hundred dollars lost income, but I know it is not right.   I thought maybe I could answer YES to distribution question, but TurboTax does not follow that up as to whom and when the distribution is applied so that does not fix anything; only makes the numbers all out of balance.   Do I just instead mark this a final return and forego the 8594 form?  And don't mark that I sold the business, but just ceased operation?

    February 22, 2023

    If you make a change in ownership percentage at any point during the year then the income is split over a weighted average.  If all of the income and expenses are yours for 2022 then the new owner owned it on paper but didn't actually begin possession of the company until he controlled it.  He has control as of January 1st 2023.  So you can simply change him in for you on the 2023 return and file the 8594 with that.

     

    @RichardTillett2760 

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