Discussion:When is an S-Corporation Considered Dissolved & When is Final Tax Year?
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Discussion Forum Index --> Tax Questions --> When is an S-Corporation Considered Dissolved & When is Final Tax Year?
| 10 January 2008 | |
| When is an S-Corporation considered Dissolved for Federal Taxation Purposes?
As far as I understand, the Corporation is dissolved when the Corporation board decides that it is dissolved? For Federal purposes, form 966 should be filed to alert IRS to this fact (within 30 days of decision to dissolve), and the final Tax return must then be filed within 3.5 month after the dissolution date. For CA State (Franchise Tax Board) the final Tax return must be filed on the regular due date + extension (i.e. Oct 15). The Corporation then has up to 1 year after filing the final return to file the Certificate of Dissolution with the SOS. For example: Corporation declares dissolution on Dec 31, 2007. Form 966 is filed before Jan 30, 2008. Final 1120S for Tax Year 2007 filed on or before March 15, 2008 (or April 15, 2008 if extension was filed). Final 100S (CA return) for Tax Year 2007 filed on or before Oct 15, 2008. Certificate of Dissolution filed on or before Oct 15, 2009.
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| 10 January 2008 | |
| I never new about Form 966 and have never filed it. Do the rest of you file this form when a corp dissolves? | |
| 10 January 2008 | |
| Absolutely. I do it - even if not required - for every corporate dissolution. | |
| 13 January 2008 | |
| Bump... "When is an S-Corporation considered Dissolved for Federal Taxation Purposes?" | |
| 14 January 2008 | |
| In California, it is disolved when you file SOS form DISS-STK (or other variation depending on corp structure) and receive back an ENDORSED copy from the state. Also, YES, you need to file form 966. | |
| 15 January 2008 | |
| San Diego,
I do not believe that the IRS would necessarily care about what happens on the state level. As illustrated in the example above, CA allows the DISS-STK to be filed up to one year after filing of the Final Tax return of the preceding year (e.g. 1 yr and 10.5 month after the end of the Final Tax year). The way I understand it is that the company is dissolved for Federal purposes as specified on Form 966. That would also be what determines the Final year for Federal (and therefore CA) purposes. | |
| 6 May 2008 | |
| I have a new client that has corporation that was dissolved in 2007 for CA with the SOS. He is working with the IRS to settle a 60K corporate tax liability for prior years. (I just had the client sign a POA so I can talk to the agent.)There is approx 250K in revenue collections that the corporation is expecting from prior years. He said that he was told that he should close out the corporation. I believe that it should have stayed active if there is more revenue expected to be received.
The bank account is still active for the corporation as well. What do you do in this situation? If the 250k is collected, do we still file the 1120 and go back to the state to reinstate the corp for CA so that we can file the Form 100? I haven't seen this before so I'm not sure where to start. Any help is appreciated. | |
| 7 May 2008 | |
| If none of the corporation’s assets have been distributed, I believe that it is possible to revoke the dissolution under California law. You should probably speak to the client’s attorney about this. | |
| 7 May 2008 | |
| Response to Cindylee
Problem with dissolution is the nature of the assets. When you liquidate a corporation, you distribute the assets. If the corporation is on a cash basis, the accounts receivable are recognized and taxed to the stockholders. If it's on an accrual basis, the A/R are also distributed, but with a basis. The retain their nature, and if less than the full amount is received, the stockholder gets a business bad debt at the end. It may be best to keep the corp active. Reinstate with the SOS if necessary. | |
| 7 May 2008 | |
| Marcilio, how does one reinstate a corporation that was dissolved (not suspended)? | |
| 7 May 2008 | |
| In Illinois, you have up to 5 years to reinstate with the SOS. Don't know about other states, but I presume it's similar. They charge franchise tax & penalties for each of the years that the corp didn't file, plus other filing fees, but all in all, not bad. | |
| 7 May 2008 | |
| Oops. Think I misread your question. If they've gone through the dissolution process, they're probably stuck. | |
| 7 May 2008 | |
| I checked with the IL SOS and was told that if a corporation voluntarily dissolved, it cannot be reinstated. If it was involuntarily dissolved through non-filing of the annual report, it can be reinstated up to 5 years. I presume other states are similar. | |
| 7 May 2008 | |
| Assuming Cindylee's client is in California, I don't believe that reinstatement of a dissolved corporation is possible. Suggest setting up a successor corporation under IRC Sec. 368(a)(1)(F). | |
