OutWestTax

Not defending the change, frankly haven't even logged in in a month 'cept for sending returns. BUT, strong passwords are a good thing. Remembering them is the bad thing.

FWIW, I found this nice password manager. It's free, open source, and let's you keep the whole mess of them on a USB stick with a single master password to open the file.

Google for "KeePass"

That's exactly the way I see it too.

To summarize, at first glance a LLC can't own S Corp shares.

Then we dig a little deeper and find a PLR that states:

"Thus, in determining whether a corporation is eligible to elect S status or continue its eligibility as an S corporation, any shares held by a single member LLC are treated as being owned directly by the LLC's owner."

So now our more nuanced (waited a week to use that word) view is a single member, disregarded entity LLC may own S Corp shares if the underlying owner is an eligible shareholder.

Interesting thing to know, but I still haven't figured out why go to the bother of putting a SMLLC in the middle. Can you think of any reason?

>>the argument that an LLC can own a S-corp<<

Harrumph, yes, well, that is of course one of the key flaws in the statement that an LLC is a disregarded entity.

But even though an LLC can't own an S-corp, an S-corp CAN own an LLC, and (I admit I'm talking beyond my expertise here) can make certain arrangements and elections to treat it all as one big happy family.

As long as we are splitting hairs, the IRS did rule in PLR 9745017 that a single member LLC taxed as a individual could own S Corp shares.

First thought is: "Why bother?" May have to actually read the PLR to find out why someone would spend the money to get a PLR on this issue.

Second thought: "Be sure and note before Jainen and OldJack that PLRs cannot be cited as authority" I know, I know, just thought it was interesting.

Medlin must have seen much trouble, he's a the type that will wear both belt and suspenders to keep his pants up.

So there was the client that was backing up his stuff each night. One day, the hard drive crashed in his auto body shop. "Got my new computer" he said, "could you restore my accounting?" as he handed me a single floppy. Folks, there was no way that 3 1/2 years of accounting was on one floppy. Long story short, Fedex delivered his old crashed drive to a data recovery service, they pulled the one accounting file off and sent back on a CD. Only cost three days and $1245 .

Real incentive to backup and test.

This is one of those areas I get on a soapbox for: Here's my plan.

My main computer uses mirrored drives in a RAID 1 configuration. What that means is that everything is written to two identical drives at the same time. If one dies, the other will notify me, then continue to operate without interruption.

I do a similar routine for nightly backups except I recommend two external hard drives. That way I can back up the entire system. Most external drives now come with backup software that manages the original backup then backs up only the changed files each night. Takes about ten minutes and that's when I check this forum while it's running. Like you, those go home with me and rotate.

It's not just for disaster either. Last time I needed a backup, I needed to retrieve a earlier version of a file. Hooked up the external drive, selected a backup made two weeks earlier, restored the file, and away we go!

Which brings up a point: Test the backup restore cycle with a dummy file. I've seen clients happily running backups each night (especially to tape) that were not working. I had one client whose last good backup was 2 1/2 months ago. I spotted the problem before disaster hit, but you gotta test your backups. Doing a actual restore of a file is the acid test.

Hi everyone:

A new client of mine had IRS take funds from her bank account b/c they taxed her gross proceeds from sale of some stocks in 2004 and 2005. She never filed schedule Ds.

Now she has submitted to me the costs and turns out she has a small loss for both years. She does not have the IRS notice nor her prior year returns. How do I go about just sumbitting 2 schedule D's - 1 for each year with no response to a notice? I only prepared her 2006 return, so I have all of her information.

Thanks.

Any thing in the mail, Bobby Sue?

Jes' some IRS stuff, Billy Bob.

Well gimme that.. I needs som'n to git the smoker going!

Good Grief! I'm not the only one with clients like that.

1. Get a POA signed for 04 and 05.

2. With that call the practitioner line and get return copies or transcripts sent/faxed.

3. Using those reports with the new information, file amended returns for the affected years.

You could do either, but the second has the effect of accelerating taxes. Most of my clients are not interested in that.

Okay that does change the entry some.

Cr Disposition of asset $15000

Dr Loan $ 7000

Cr. Vehicle $10000 ( Assuming a fully depreciated vehicle)

Dr. Accumulated Depr $ 10000

Dr. Distributions $ 8000

I'm guessing the reason the payment went to the shareholder is one of those deals where they titled the vehicle in the shareholder's name rather than the corp? Sigh....

KC,

What should I do about the note payable sitting on the books. This was paid off by the insurance company in Dec 2006? There is a $1000+ difference between the balance and payoff which is not interest. So - I guess I am asking about what the accounting entry would be here.

Db. Loan $7,432.79

Cr. Due to Shareholder 6,261.96

Cr. Gain on Asset 1,190.83

Does this look right? I really appreciate your help.

Laurie

As KC said, you can handle several ways:

I would do it this way assuming the insurance was received in 06.

Cr Disposition of asset $8000

Dr Loan $ 7433

Cr. Vehicle $10000 ( Assuming a fully depreciated vehicle)

Dr. Accumulated Depr $ 10000

Dr. Cash $ 2567

Note that because you have a fully depreciated vehicle, you have a gain on the insurance proceeds. Makes sense, you have no casualty loss because you have zero book value = nothing to lose from a tax basis. If the vehicle is partially depreciated, then you lost the book value and the gain is reduced.

Be my guest.

Ah, the incorporated checkbook! Let's see, what are the potential problems? Depends on the mood of the IRS auditor but let's see...

How about reclassifying those payments as disguised payroll, with payroll taxes not paid, penalties for 3 years of this stuff. Sweeet...

No, let's look for the receipts on those expenses charged on the personal card. Bet he doesn't have them and a recent court case ruled the statement alone as insufficient evidence. Little more taxable income if you please. (True, could be done on corp card also, but a personal card has a higher likelyhood of missing receipts or support).

Sometimes I tell clients once you stir personal and corporate into the same soup, the IRS will want to tax the whole bowl. And the taxpayer gets stuck with separating the tomato sauce from the chicken broth.

Good luck!

Here's where to start. You're looking for a reasonable cause exception. Goto this link which is the penalty section of the IRS manual, you'll get a lot of information on your chances straight from the horses mouth. If you see a way, write the request knowing what the Service wants.

http://www.irs.gov/irm/part20/index.html

Doug

Let me make sure I've got this straight. This was a cash advance on a Personal card loaned to the Corp. Do I understand the Corp is paying the credit card? If so, the Corp books would show a payment to the Long term liability account. The Personal credit card should not even be in the Corp books.

If, as so often happens, the personal card is use for Corp expenses also, the shareholder should turn in the expenses for reimbursement under an accountable plan. The Corp then reimburses the shareholder who then pays the credit card bill personally.

The other option, not so clean, put the credit card on the books. Don't record the cash advance as a loan, just a charge on the credit card. Code the personal expenses to distributions, and pay the card in the Corp. Again, this is muddy and can cause problems.

One such problem is that when the shareholder loaned money to the corp, the basis would increase. In the second option, the basis may not. Let alone the co-mingling of personal and corporate activities.

In Idaho, our ski resorts are going up in flames and our senators down in flames.