Discussion:C-Corp NOL Utilization
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Discussion Forum Index --> Tax Questions --> C-Corp NOL Utilization
| 20 January 2008 | |
| A C-corp manufacturing company incurs net operating losses in 2004 and 2005 which results in a large NOL. It ceases day-to-day operations late in 2005 and liquidates most of its business assets during the 1st quarter of 2006. It then remains essentially dormant for the rest of 2006 and 2007.
In 2008, the company and principal officer intend to enter into a marketing ageement to receive commissions for the sale of "services" to non-manufacturing companies. These services are unrelated to manufacturing. Can the revenues from this agreement be used to offset the NOL? Would the answer above change if the C-corp created a wholly owned LLC with a different business name and entered into the marketing agreement noted above? | |
Corptaxhelp (talk|edits) said: | January 21, 2008 |
| The losses are real. The income is real. As long as both belong to the C-corp, I don't see a problem.
I am a bit bothered by the quotes around services and the LLC. Something doesn't smell right. Does this corporation have just a single shareholder? My personal policy is to only break/bend one rule at a time. Which means, if you're speeding, don't be drunk. If you're cheating on your spouse, don't cheat with a kid from the local high school. If the car is 'borrowed', don't run any red lights. It sounds as though your client might have a kilo of cocaine *and* a dead hooker in the trunk of his stolen car. If there is a smell in need of removing, I'd make sure the marketing agreement was with the C-corp and that all shareholders know about said marketing agreement. | |
Death&Taxes (talk|edits) said: | 21 January 2008 |
| And I presume there was a proper election to carry the losses forward? | |
| 21 January 2008 | |
| There was no hidden agenda with the use of "services". I was simply trying to communicate that the services being sold for a commission payment to the C-corp were in an entirely different type of business than the C-corp was engaged in when the losses were incurred.
Also, to the point of using an LLC. If the C-corp created a new, wholy owned LLC for this new businss activity, would that impact the C-corp's ability to utilize the income to offset the NOL? | |
