Discussion:Where to deduct state taxes
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Discussion Forum Index --> Tax Questions --> Where to deduct state taxes
| 11 May 2006 | |
| I have a client who paid state taxes personally (withholding, sales) for a S corporation that was dissolved five years previously. My question is where to deduct???
1. as a state tax deduction they gets hit for amt. big time 2. on schedule E page 2 as if a s corporation (which does not exist) 3. or sch a misc deductions not subject to 2%. Thanks. First time asking questions. Used site during tax season got many answers thanks everyone. who had time in tax season | |
| 12 May 2006 | |
| Hi I would treat it as additional stock basis in the S corp and deduct on sch D. bye | |
| 12 May 2006 | |
| I do it the same way as WesR. The only problem is that you get limited to $3k total capital loss per year. | |
| 12 May 2006 | |
| Sorry, I should have added: unless you are able to use the losses to offset any capital gains. | |
| 12 May 2006 | |
| Schedule D would be the place, however considering what the payments were for I would wonder about the effects on corporate income when the original events occurred. Were the sales taxes determined to be due actually included in gross income? And the state withholding taxes? What exactly happened there? | |
| 12 May 2006 | |
| I will be very careful about deducting anything. Sales taxes and withholding are "trust fund", so, if they were not paid when due, theoretically the owner of the S corp took "excess" cash (i.e. these taxes) for personal use. Based on your short explanation, I think there is nothing to deduct. | |
| 12 May 2006 | |
| Regardless of whether the former-shareholder paid expenses or liabilities, his basis would still be increased by the amount he paid. | |
| 12 May 2006 | |
| I agree that basis would be increased by amounts paid, but question whether basis was originally reduced by amounts not paid. What effect did this liability have on dissolution? | |
| 12 May 2006 | |
| Generally the post liquidation outlays by former shareholder will be capital loss. This is assuming that the expenses were not previously deducted or used for tax benefit under corporation's method of accounting. Do a search with the search feature under "Arrowsmith". There was a length discussion along these lines on this forum last month. | |
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