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Discussion Forum Index --> Tax Questions --> How to Close a C Corp with negative retained earnings
Taxpayer (talk|edits) said:
| 15 September 2006
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| I have a C corp client that has negative retained earnings, loan from shareholders, and common stock of $1,000. How should I report the closing of business on their final 1120.
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Kathleen (talk|edits) said:
| 19 September 2008
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| I'm having the same problem. Have you resolved anything since your last post?
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ReadMyLips (talk|edits) said:
| 20 September 2008
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| You could reclassify the shareholder loans as additional capital contributions so that the shareholder(s) could take a capital loss on their 1040. If nothing else was on the BS at the end of the year, then the RE and stock/contributed capital would be equal.
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Southparkcpa (talk|edits) said:
| 20 September 2008
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| I agree with above in general. Or think this through....If the negative RE were financed by a bank loan for example, you would then have foregiveness of debt income when you wiped the loan off the books which would true up the RE and a NOL carry forward would wipe out Taxable income. In your case, the negative RE were financed by the owners loan. So income to corp, you should have an NOL, and then cap loss to shareholders for loss on debt.
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Nanc98 (talk|edits) said:
| 20 March 2009
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| So would one just report this on a Schedule D of a 1040 with the basis of the stock being the equity and the final value for the worthless stock as $0 to take a the loss. And if the contributions were done within a year it would be a short term loss to offset any other income of the shareholder? No other reporting on the 1120 is required except that it is the final return?
Thanks
Nance
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