mircpa

@cpabsd

What is transition period ? You mean from the time contract entered into until it is closed ?

@peggysioux5

File tax returns for all years partnership transacted business even if extending beyond dissolution date.

@BulldogTom

I believe it is CA based business S corporation, when 1120S gets generated it also generates CA K1 which would have K1 income or loss and capital gain which is sourced to CA. S corporations in CA files 100S & K1 100S

If this business is based in CA then it CA source K1 income & capital gain regardless of where shareholder lives.

@Tax Prep by Deb

I believe this shareholder who is resident of OK should file CA 540 NR with its share of CA K1 income & capital gain. Include CA 540 NR California adjustments.

@Max W

If all liabilities are loans that means owners do not have stock basis. Equity of negative 150K could comprise of previous years and current year losses.

You should also look at past years 7203's. Double check outside entities loan balances at year end, may be they might have miscategorized shareholders loans as outside loans.

@schirallicpa

Since wife is contesting ownership, do nothing at this point. Wait until this ends up in court and follow judge's advise.

I am thinking may be you have to retro fix

@schirallicpa

File retro 8832 to regard this as corporation.

I believe in absence of 8832, IRS is regarding this entity as sole proprietor or partnership.

At this time you can either file retro 8832 for it to be treated as corporation or amend tax return to sole proprietor (Sch C) or partnership.

@Max W

Issue 1099 for whatever amount paid to contractor prior to and subsequent to sale & mark that as expense OR increase basis

@Catherine

Are you not suppose to file MA Non resident tax return indicating whole year taxpayer was not present in MA ?

MA instruction to file ONLY if MA source income greater than 8,000

@WITAXLADY

Your answer might lie in basis. It could be that 7203 does not have correct basis from past years.

There are 2 separate issues being discussed

One is reasonable officers compensation on which SS & medicare needs to be paid.

Amount of SEHI needs to be added in line 1 of W2. Also you will take deduction of SEHI amount against AGI in 1040. For you to take this deduction, amount of SEHI should be less than SS & medicare wages.

Should the amount of SEHI is higher than medicare wages then your deduction is limited to amount of SS & medicare wages & excess will get reported in Sch A under medical expenses.

@JohnH

I will not be worried about employee living in NC or employer headquartered in MA. I will be looking at where end client work is being performed & that is exactly what respective states will look for.

If in fact work is performed in MA then employee will be filing MA non resident & would take MA NR tax credit in NC resident tax return. I believe this is the safest approach based on facts stated.

You should also check if NC & MA has any reciprocal agreement.

Around last week of December 2022 I had to talk to CA FTB agent, one of my client received notice requesting to file 100S for few past missing years for IL based software consulting business. Normally I file tax returns only when consulting business hires employee in CA or have an end client who is being serviced in CA for that respective year.

Earlier CA use to collect minimum $800.00 franchise fee regardless of whether you did business in CA or not. As long as your business is registered you are on the hook to pay this fee unless you forfeit your right to do business in CA

Since client did not file tax returns as there was no CA source income in fact agent waived off franchise fee whichever years business had zero source CA income. This was something new to me because in the past for other clients they had to pay $ 800.00 fee regardless of whether you did CA business or not.

In fact client requested me to close CA business account but FTB agent suggested me to keep it open & continue doing what I am doing & just file tax returns when business has  CA source income.

If you look at CA Sch R apportionment & allocation It has 2 subsets first is CA sales to total sales & 2nd subset has 3 factor formula CA property, payroll & sales to total sales.

On 1/15/2023 at 1:49 PM, mircpa said:

I believe nexus determines taxability of services.

@Abby NormalDoes your friend hired an employee to provide services to client in CA. If the answer is yes then business should file 100S, Sch R & individual owner 540NR (if it's an a S corporation)

I am surprised I was the first person to talk about nexus unfortunately my post was voted down.

I believe nexus determines taxability of services.

@Abby NormalDoes your friend hired an employee to provide services to client in CA. If the answer is yes then business should file 100S, Sch R & individual owner 540NR (if it's an a S corporation)

@grandmabee

You have 75 days from its inception to file 8832 and or 2553 for it to be timely. Should you file beyond this time then follow retro relief route.

@michaelmars

File 8832 to convert from disregarded entity to be elected as corporation & late election 2553. I believe late election relief is available for 8832 under Rev Proc 2009-41  & for 2553 Rev Proc 2013-30.

First create incorrect tax return, save it & then click amend tax return from inside software & add up all new required schedules & forms. Send 1040X with new schedules/forms which were not sent earlier to IRS.

May be reduce recover period to 1.6 yrs.

What kind of assets are these those that you want to write off almost 63% in year 1 ?

Yes I do have separate K1 input entry for each property.

What I can do whatever losses showing up until transfer from relinquished property be moved to replacement property. By this way there would be zero losses for give up property. And then by doing this form 8582 would show zero losses from relinquished property.

All real estate properties are owned by S corporation under its name. Each property has separate entry onto form 8825 and all its cumulative losses/income gets shown on shareholder K1. I made separate entries onto K1 input screen in individual tax return for each respective property with its respective share of rental loss or income matching cumulative K1 total, clearly marking as passive activities and it is shown as separate entries for each property in 8582.

Basis limitation 7203 is also being done.

If PALs are not moved they continue to show on relinquished property in future years. Relinquished property ceases to exist when exchange takes place.

At corporate level that property showed losses for until time it was owned and it also has previous year losses too.

One S corporation owning multiple properties. Relinquished and replacement property both are owned by S corporation.