HELPING YOU MOVE TO THE RIGHT DIRECTION
Choosing the right accountant for you could be one of the biggest decision you can make in your life.
An accountant can help you with any one of your life's major events. From having a new child
to dealing with a death of a loved one; from getting married to getting a divorce; from buying
a home to selling one; or from forming a new business to dissolving one.
A good accountant can be a good partner to help you make these events a better one. A good
accountant can help you save some of your hard-earned dollars and can make your business
and personal endeavors a more successful one.
Ladinez & Company, PC is a CPA firm located in the city Torrance, California. We provide services in income tax return preparations, payroll, bookkeeping, and business consulting. We are tax accountants, tax preparers, bookkeepers, payroll service providers, and business consultants. Our office is within a comfortable driving distance from the beach cities, such as Redondo Beach, Manhattan Beach, Hermosa Beach, El Segundo, Long Beach, San Pedro, and Rancho Palos Verdes. We are also within a driving distance from Los Angles city and Orange County.
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Income Allocation When a Shareholder Terminates His Interest in an S Corporation During the Taxable Year
When an S Corporation shareholder’s interest is terminated during the year, the shareholder’s allocation of income, losses, and deductions is generally computed by applying percentage to the full-year activity of the corporation. Terminating interest in the middle of the year is a complex matter because items are prorated on a per-share, per-day basis.
For example, you and other shareholder are 50/50 owners of an S corporation. The corporation shows a $500,000 loss from January 1 through June 30. Your partner wants out and sells everything to you. You continue to run the corporation through the rest of the calendar year. The corporation actually turned a profit of $500,000 for the entire year. Since your partner is not participating in management or ownership of the company from July 1 through Dec. 31, he will not be entitled to compensation or distributions based on profits. However, your partner will receive a schedule K-1 showing approximately $125,000 of income without having received any distributions.
This is ($500,000 profit for the whole year)(.50 ownership)(.50 of the year) = 125,000. This is greatly unfair to your partner.
To circumvent this, both of you must agree to close the books (Election to Close Books) at the date of disposal so the tax year will be divided into two short years. This will allocate items to your partner only up to date of disposition of his interest. And start a new book after the date of disposition. If both shareholders elected to close books at the date of disposition, the leaving shareholder will get K1 with $250,000 loss.
Refer to 26 U.S. Code § 1377 for more information.
- We are CPAs, tax accountants, tax preparers, business managers and consultants based in Torrance, CA near Los Angeles & OC, serving the entire U.S. See us at Google+, Yelp, Google Brand, Yelp. Call us (424) 278-4838 or e-mail us at This email address is being protected from spambots. You need JavaScript enabled to view it..
CPA Firm, Tax Preparers, Accountants, Bookkeepers, Payroll & Business Consultants in Torrance, CA
Our CPA firm is based in the City of Torrance, CA. We provide tax, accounting, and business services to individuals and business. The 2010 United States Census reported that Torrance had a diverse population with (51.1%) White, (34.5%) Asian, (2.7%) African American, (0.4%) Native American, (0.4%) Pacific Islander, (5.4%) from other races, and (5.5%) from two or more races. Hispanics or Latinos of any races were 23,440 persons (16.1%), while non-Hispanic whites formed 42.3% of the population. Our CPA firm understands and accommodates the needs of these diverse taxpayers.
We are a CPA firm, tax preparers, tax accountants, bookkeepers, payroll service providers, business managers and consultants based in Torrance, CA, near Los Angeles, Long Beach, and OC. And we serve the entire U.S.
Other facts about Torrance:
Torrance’s economy is majorly supported by big companies, such as Honda, Exxon Mobil Refinery, Allied Signal Aerospace, and others. The ExxonMobil refinery in the north end of the Torrance is responsible for much of Southern California's gasoline supply. Torrance was also an important hub and shop site of the Pacific Electric Railway.
Torrance was originally part of the Tongva Native American homeland for thousands of years. In 1784 the Spanish land grant for Rancho San Pedro, in the upper Las Californias Province of New Spain and encompassing present day Torrance, was issued to Juan Jose Dominguez by King Carlos III—the Spanish Empire.vIt was later divided in 1846 with Governor Pío Pico granting Rancho de los Palos Verdes to José Loreto and Juan Capistrano Sepulveda, in the Alta California territory of independent Mexico.
