inv removed for personal use 1040 sched c

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#1
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If one transfers inventory from a sole prop (sched C) to an LLC, how will you close out the inventory on the sched C's closing inventory?

Example: Apr 2020, sole prop closes shop and gives 10k inv to LLC.

From my understanding one would put "inv removed for personal use" on 1040 Sched C to not overstate COGS and 0ing out inv. But where exactly do I put that? Do I simply write it out on a certain line? Or is there a box to check?
 

#2
Nilodop  
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Is the llc a dre? If so, just keep the Sch C going. If not, I'd leave it in ending inventory. It's not going to be for personal use, right? Just trying to get to the right income. Then, it's opening inventory on the llc.
 

#3
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The LLC is an S-corp is its not a DRE.

So I have a sole prop with 10k inventory. I then form an LLC and elect s-corp status and sell this 10k worth of inventory in the S-corp. The sole prop and s-corp are essentially the same business as its continuing the same operations. I suppose one could treat it as the same business or a completely new business, to me it really doesn't matter.

I am just trying to figure out the best way to treat this transfer of inventory from the sole-prop to the S-corp without overthinking this.

For the S-corp I currently have this 10k inventory treated as equity (owners contribution) and was going to enter (10,000) [negtive] on the sole props sched C line 36 "Purchases less cost of items withdrawn for personal use" so the starting inventory is zeroed out and the ending inv is 0.

What do you suggest I do?
 

#4
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I agree with Len...leave it in ending inventory

The inventory on hand when the Sch C activity ended was $10K. It wasn't used/converted to personal use.
The 2021 Sch C won't exist. There's no reconciliation or other reporting to show where the inventory went. It sounds like you've properly recorded it on the S-corp books. I think you're good.
~Captcook
 

#5
Nilodop  
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and sell this 10k worth of inventory in the S-corp.. No. Contribute, not sell. Sec 351.
 

#6
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Nilodop wrote:and sell this 10k worth of inventory in the S-corp.. No. Contribute, not sell. Sec 351.


I don't think he misspoke here. He said sell "in" the corp, not sell "to" the corp.
~Captcook
 

#7
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CaptCook is correct. The sole prop did not sell TO the s-corp, it sold the inventory in the s-corp as the two entities are the same business.

Would it make any difference if I:

1) treat the 10k of inventory as removed for personal use on the sched c when transferred to the s-corp as owners contribution https://imgur.com/a/1wy05Cg or,

2) Just leave the 10k of the inventory on the ending inventory balance of the sched c then treat the transfer to the s-corp as owners contribution? There will be no 2021 sched c.
 

#8
Nilodop  
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I give up.

They did not sell the inventory "to" or "in" the S corp., at least as I use the term "sell". I'd say the proprietor of the proprietorship (an individual) contributed the inventory (in a section 351 transaction) to a newly formed LLC that elected S treatment. That S corp. held the inventory primarily for sale to customers in the ordinary course of its business. How was it removed for personal use?

But I admit the sale occurs "in" the S corp.
 

#9
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CGT, #2 as you've described would be correct.
~Captcook
 

#10
jon  
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Looked quickly, bu 351 an attachments will show you did a tax free action. The owner took it out call it a draw whatever you want, but it has no effect on the C for the year of termination, he contributed it into ? under 351.
 


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