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Author Topic:   Adj Cost basis, S Corp changed to C corp
Becky Sharpe
Member 		posted 06-26-2002 02:15 PM     Click Here to See the Profile for Becky Sharpe   Click Here to Email Becky Sharpe     Edit/Delete Message
What's the best way to effectively reduce the cost basis of a common stock? The corp changed from S Corp to C corp and previous lossed that flowed through, effectively reduced the cost basis of the asset from the original investment. We want to ensure the correct gain/loss is reflected when the asset is ultimately sold.
VERY IMPT: I have to be certain that the unrealized g/l on the SPA stays in sync with the Unrlzd on the balance sheet.

Thanks.

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Pamela
Member 		posted 06-26-2002 03:09 PM     Click Here to See the Profile for Pamela   Click Here to Email Pamela     Edit/Delete Message
In order to affect a change in the cost basis, a sale must occur for proper gain/loss tracking.

Sell the S Corp for the cost basis of the new C Corp (the difference in S corp cost basis will be the losses). Buy the C Corp for the same amount the S Corp was sold for. This records the losses from the S Corp and sets up the C Corp with the new proper cost basis and name, and there is no cash balance change in the brokerage journal account where you post the transaction. Make sure you have a detailed memo on each transaction for audit purposes.

This is working on the assumption that the losses incurred from the corp change are to be reflected in the current year taxes.

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