Online Database of Social Media Policies. Find an Article Bank (Article Submission Directory) Converting a sole proprietorship into an LLC. RECAPTURE, war.
The conversion of a sole proprietorship into an LLC may result in the former proprietor recognizing income, due to required loss recapture under the at-risk rules at-risk rule A law that limits tax write-offs to the amount of money directly invested (and thus, at risk) in an asset. The purpose of an at-risk rule is to prohibit investors from deriving tax benefits that exceed the amount of money actually invested. . Recapture may be required if the business activity and the proprietor are subject to the Sec. 465 at-risk rules and if losses have been recognized in prior years.