Instruction for consolidating corporation returns

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Care should be taken to properly report an asset sale on the S corporation return versus passing through a stock sale as a separately stated item on the shareholders' individual returns, even though the sale contract is labeled a Stock Purchase Agreement.

This asset sale treatment could have unintended tax consequences if the QSub were bought by the S corporation rather than built by the S corporation.

The carryover asset basis is substituted for the purchase price of the stock in a QSub election, and no tax deductible loss may be recognized.The difference between the

The carryover asset basis is substituted for the purchase price of the stock in a QSub election, and no tax deductible loss may be recognized.

The difference between the $1 million stock purchase price and the $100,000 carryover asset basis is not tax goodwill, because the acquisition of the existing corporation was a stock rather than an asset purchase.

While this result seems counterintuitive and even unfair, it makes sense from a tax perspective.

Note: This article originally appeared in the October 2012 Footnote.

Due to popularity of the topic, it has been reviewed by Mark Sellner and re-posted in October 2015.

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The carryover asset basis is substituted for the purchase price of the stock in a QSub election, and no tax deductible loss may be recognized.The difference between the $1 million stock purchase price and the $100,000 carryover asset basis is not tax goodwill, because the acquisition of the existing corporation was a stock rather than an asset purchase.While this result seems counterintuitive and even unfair, it makes sense from a tax perspective.Note: This article originally appeared in the October 2012 Footnote.Due to popularity of the topic, it has been reviewed by Mark Sellner and re-posted in October 2015.

million stock purchase price and the 0,000 carryover asset basis is not tax goodwill, because the acquisition of the existing corporation was a stock rather than an asset purchase.While this result seems counterintuitive and even unfair, it makes sense from a tax perspective.Note: This article originally appeared in the October 2012 Footnote.Due to popularity of the topic, it has been reviewed by Mark Sellner and re-posted in October 2015.

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