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jvannucci
03-01-2011, 12:56 PM
The owner of the company I worked for passed away and the company closed. The next company I went to work for paid $2,000 for all of the office equipment from my prior employer (including computers, plotters, printers, desks,filing cabinets, etc.). However, the fair market value of the equipment is probably more in the neighborhood of $10,000. I think my old boss's widow was being kind to me because I stayed to help close out all of the projects before accepting a new position.

When the economy tanked, I was laid off from my second employer and went to work as self-employed consultant for a year. I was allowed to take all of the equipment with me at no cost. Now I have incorporated and want to transfer the equipment into the company. I have no purchase info for it since I did not purchase it. Can I transfer it as opening balance equity and depreciate it over time?

Do I use the fair market value, or the price my former employer paid? How would this work?

vangogh
03-02-2011, 12:35 AM
This isn't my area of expertise. I'm mainly replying to give your thread a bump and keep it active so those who have more expertise will be more likely to notice it.

I would think some of this is up to you. The corporation is buying equipment from you the person. I don't think what you did or didn't pay for it is relevant. Imagine you decided to sell the same equipment to a corporation you aren't affiliated with. You certainly wouldn't have to give the equipment away for free just because you didn't pay for it. You'd agree on a sale price.

I'm assuming you can do the same thing now, though within reason. You naturally can't do anything that would be an attempt to defraud the IRS in any way. I don't think you have any intention of doing that by the way. I'm guessing you'd want to use fair market value to set a price. I don't know that fair market would have to be the exact price, though I suspect the IRS has some rules on this. I'd also assume that as long as the corporation is paying for the equipment it can be depreciated according the rules of depreciation.

I probably have't helped much, especially as most everything I'm saying is more guesswork on my part. Hopefully though I've managed to help get the attention of those who'll have a better answer.

huggytree
03-02-2011, 06:50 AM
i dont think you can deduct or claim anything since it was given to you for free...

if you dont have a reciept then how would you prove what you paid for it if you claim $10,000....you paid $0, so your way ahead....id stop looking for a way to make a profit on it, you cant get better than free

Business Attorney
03-02-2011, 10:08 AM
Typically, you recognize no gain or loss on an asset transferred to a controlled corporation or a partnership (including an LLC which is taxed as one or the other). A single member LLC (http://www.limitedliabilitycompanycenter.com/what_is_a_single_member_llc.html) is typically disregarded entirely as a separate entity for tax purposes. In all those cases, the new entity inherits your tax basis.

If you were given the assets for free and did not treat the receipt of the property as income at the time you received it, you have a zero basis. Therefore, the entity has a zero basis. If you reported the fair market value of the property as income on your own return when you received the property (which is what you should have done), then your tax basis is the amount that you reported as income, less any depreciation you may have taken yourself after acquiring the property.

Unless the entity has a tax basis, the entity cannot take any deduction.

Note: This is for general informational purposes only and is not tax advice. Consult your own tax advisor.

jvannucci
03-02-2011, 10:30 AM
Thanks so much.