closing a corporation

[schirallicpa]

I guess I thought that when the corp discontinues business the final return is filed.  We had a corp that finished up business early 2022.  I filed a final return knowing there was still a small balance in the checking account.  So what - that is part of the winding up of business that is outside of needing reporting - an accrual is paid or some small misc fee is paid.  But I just got told by a "big firm" CPA that the final return should not have been filed because the bank account was not closed yet.  I personally think that that is just milking the corp for one more bill for one more corp return that doesn't need to be filed.  Have I treated things wrong all these years?

[DANRVAN]

17 minutes ago, schirallicpa said:

final return should not have been filed because the bank account was not closed yet.

That is correct.  A corporation is required to file a return as long as it is in existence, whether it has any income, expenses or not.

[jasdlm]

Danrvan, I absolutely always agree with you, and interestingly, this time, I don't, so I'm certain that I must be wrong (and I mean that sincerely and respectfully).  I always appreciate your answers, and I think you're very knowledgeable. 

I think you can leave the bank account open to handle any final issues, taxes, etc, and make final distributions to owners, but you can't conduct any more business, and you must mark the return final and close your account with the IRS.

I'm not trying to disagree ... I just want to get more information, because I looked for a bit, and I can't find support either way.  If fact, some states require that you not distribute assets until you've formally dissolved your business (filed for dissolution), so that would be interesting to handle.  I might be thinking too technically on the legal side and not on the tax side.

Again, I'm pretty certain I'm wrong on this given that the answer came from DanRVan, but I would love to get a better understanding.  Schiralli, I've done it the way you have before, unfortunately, so I'm in your boat ... we'll face the feds together ;)!

Thanks much!

[DANRVAN]

 

12 hours ago, jasdlm said:

leave the bank account open to handle any final issues, taxes, etc, and make final distributions to owners, but you can't conduct any more business,

The code is fairly clear on this.  A corporation is in existence if it retains a bank account and is in the winding down process regardless of state law, therefore a return is required.

 

12 hours ago, jasdlm said:

make final distributions to owners

The final distributions are reportable transactions.

Per 1.6012-2

(1) "shall make a return of income regardless of whether it has taxable income or regardless of the amount of its gross income."

(2) "A corporation in existence during any portion of a taxable year is required to make a return. If a corporation was not in existence throughout an annual accounting period (either calendar year or fiscal year), the corporation is required to make a return for that fractional part of a year during which it was in existence. A corporation is not in existence after it ceases business and dissolves, retaining no assets, whether or not under State law it may thereafter be treated as continuing as a corporation for certain limited purposes connected with winding up its affairs"

[jasdlm]

Thank you for taking the time to post this.  I'm truly grateful.

[Lee B]

I have closed some corporations over the years but not recently,

For some additional input on this topic, according to The Tax Book:

"A Corporation will terminate upon the complete liquidation of the corporation's assets."

"Note:   A complete liquidation can occur even though the corporation retains a small amount of assets to settle debts and pay final administrative costs.

Amounts remaining are then distributed to shareholders."

"Post-termination expenses: Expenses of a corporation incurred after a complete liquidation are treated as capital expenses (additions to stock basis)."

A classic example would the final bill for preparing the last corporate tax return.

[DANRVAN]

31 minutes ago, Lee B said:

according to The Tax Book:

versus Tax Code. 

I have never been a follower of The Tax Book.  Although I tried it out once.

[Lee B]

Once again it just shows that out Tax Law is complex and that knowledgeable people can arrive at different conclusions.