Discussion:Prior C corp earnings in S corp
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Discussion Forum Index --> Tax Questions --> Prior C corp earnings in S corp
| 25 December 2006 | |
| Merry Christmas!
Have a client that is an S corp., has prior C corp earnings of about $350,000, and accumulated AAA and current year write offs of about -$460,000 in the S corp. It is my understanding that the -$460,000 absorbs the +$350,000 C corp earnings and there is no dividends or recognition of tax of the $350,000. Am I understanding this correctly? Thank you. | |
| 26 December 2006 | |
| I thought I would get this to the top again.
Also, 2006 is to be "Final" return. Thank you. | |
| 27 December 2006 | |
| If 2006 is the final return, then I assume that the S corp is liquidating. The liquidation will be a taxable liquidation under sections 331/337. The corporation will recognize gain/loss on disposition of its assets. This gain/loss will flow through to the shareholders. The shareholders will also recognize gain/loss on disposition of their shares. The amount of the earnings (C corp or otherwise) will not be relevant. The corporate earnings do not factor into calculating the corporate-level or shareholder-level gain/loss. On the other hand, if the S corp has built-in gains (Sec. 1374) from the conversion to S status, then corporate-level tax may be paid. | |
| 27 December 2006 | |
| Thanks Intl. There are no built in gains that I am aware of but sounds like i had better request some prior returns.
Thanks again. | |
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