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Tax Law (Questions About Taxes)/Property in Dissolved Subchapter S Corporation


QUESTION: My sister and I own commercial property in Orange County, California. In 2008, we formed a Subchapter S corporation for lawsuit protection and transferred the property into it. However, we subsequently determined that the state requirements that went with the corporation were not worth the trouble, so in 2009 we dissolved the corporation. However, we did not transfer the property back to our personal tenants-in-common ownership. My question is can we belatedly do such a transfer via quitclaim deed and are there any income or property tax or other consequences from doing so?

ANSWER: depends upon the value in 2009 when you closed the s corp.
you did a "dividend" or distribution then.

assuming you did not recognize much gain/increase in value then, you would not have had income.

did you file the 2008 and 2009 s corp income tax returns? did you list the distribution and termination and mark them final?

but you did not actually retitle the property.. right?

---------- FOLLOW-UP ----------

QUESTION: thanks much for the info! I'm not clear though on whether I can now belatedly do a transfer via quitclaim deed even though the corporation has been dissolved.

theoretically, by closing the corporation, you did indeed transfer assets to the shareholder(s)... filing a quitclaim is likely the only way to get the title clear.  as long as you have not had any issues since the corp closed which would impact the clear title..  you can do it..  i would have your lawyer check to make sure that there is nothing unique in the title area which would require special notice.

did you (do you) have a mortgage on the property?

but from a tax perspective.. i see nothing wrong as long as you did the proper reporting when you distributed the asset and also filed final income tax returns.  

good luck


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