1120S Assets in note take over

Forum|Forum|1 year ago
July 7, 2025
2 replies
13 views

Good afternoon. I have an 1120S single shareholder business.

The notes the business had were taken over by another business. I have sold those assets for the amount of the notes taken over. The shareholder included in this take over other assets. How do I treat these assets that were assumed in the note takeover? Do I treat all the assets as a part of the take over even though they didn't technically get anything for them? Can I enter the date of take over with no sale?

ProSeries Professional

Best answer by TaxGuyBill

@judys3 wrote:

I have sold those assets for the amount of the notes taken over.

In most cases for this scenario, that isn't the correct way to do it.

Unless the contract specifically states otherwise, you should allocate the purchase price (the assumption of the loans) between ALL assets, not just the ones that had a loan.

For example, let' say there was a total of $1000 of loans that were assumed. That was secured by 2 out of 5 assets. That $1000 should still be allocated between all 5 assets (based on the proportion of FMV of each to the total FMV), not just the 2 assets.

sjrcpa

Level 15

So all of the assets of the business were sold? As part, or all, of that transaction, the buyer assumed seller liabilities?

The more I know the more I don’t know.

J

judys3Author

Level 6

The "buyer" assumed all liabilities which were for only a small portion of the assets but took over everything.

The shareholder is keeping the land and the buildings but has closed the SCorp. I know I have to "sell" these to the shareholder for FMV.

T

TaxGuyBillAnswer

Level 15

@judys3 wrote:

I have sold those assets for the amount of the notes taken over.

In most cases for this scenario, that isn't the correct way to do it.

Unless the contract specifically states otherwise, you should allocate the purchase price (the assumption of the loans) between ALL assets, not just the ones that had a loan.

For example, let' say there was a total of $1000 of loans that were assumed. That was secured by 2 out of 5 assets. That $1000 should still be allocated between all 5 assets (based on the proportion of FMV of each to the total FMV), not just the 2 assets.

J

judys3Author

Level 6

Great. Thank you. I had wondered this. Thank you for this information!

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