skier_j

I can see a third----a non depreciable/amortizable account called "investments in artwork" or similar.

Do you think Microsoft has no artwork on its walls??

Why overthink these things? No need to distribute or assign to an owner---unless thats what they wish to have happen....or perhaps the artwork is really in their living room.....

there is a 250 year old inn around here that is flush with antiques and art. It sits on the balance sheet just fine.

edit to expand answer.

While there are rules governing what deductions are allowed with appreciated property like art, there are, to my recollection, no rules prohibiting the holding of appreciating assets on the balance sheet for federal tax purposes.

Whether holding appreciated (or appreciating) assets inside a C corp is a good idea is debatable.

The reason is that in order to get the asset out, there will be tax to pay at shareholder level. Why?? it is a dividend.

Sub Chapter "S" status became very popular after the 1986 act for many reasons, one of which was the ability to pass income and loss out to the shareholders for taxation and then have the ability to pass the cash out later as previously taxed income.

In other words, the double taxation issue of C Corp earnings being taxed at the corp level and then having distributions paid out to shareholders being taxesd again as dividend income was eliminated.

On conversion to S, appreciation "Built in" to any assets had to be determined and a corporate tax paid on any disposal of the Built IN Gain assets for some period of time after conversion (I forget the exact number but 10 years sounds right)

You might consider electing S for your client, any "built in gain" like appreciation in artwork, perhaps a building that has increased in value has to be identified and you then have to be careful for whatever the time period is before selling or distributing

SRICPA

Thank you for your answer!!!! Happy new year