Discussion:QSub Filing Requirements..
From TaxAlmanac
| Revision as of 03:47, 21 June 2009 Harry Boscoe (Talk | contribs) (BBQ - I'm pretty) ← Previous diff |
Current revision Sheldon (Talk | contribs) (The new corporat) |
||
| Line 15: | Line 15: | ||
| {{ForumReplyPost|UserID=Harry Boscoe|Date=21 June 2009|Text=BBQ - I'm pretty sure it's the S corp "parent" that makes the QSSS election. How are these two corporations arranging to become "parent" and "sub" on July 1? There are probably several ways it can happen, and it may shed some light on what should be shown on the balance sheet(s).}} | {{ForumReplyPost|UserID=Harry Boscoe|Date=21 June 2009|Text=BBQ - I'm pretty sure it's the S corp "parent" that makes the QSSS election. How are these two corporations arranging to become "parent" and "sub" on July 1? There are probably several ways it can happen, and it may shed some light on what should be shown on the balance sheet(s).}} | ||
| + | |||
| + | {{ForumReplyPost|UserID=Sheldon|Date=29 June 2009|Text=The new corporation would end up with the current corporations stock (or all of the assets). 80% of the purchase price is related to current goodwill of the founder of the company with a very near 0 basis inside and outside the corporation. | ||
| + | |||
| + | Since I wrote the above I have been at the following charts and trying to determine which works best. | ||
| + | |||
| + | http://www.andrewmitchel.com/charts/rr_2008_18_sit_2.pdf | ||
| + | http://www.andrewmitchel.com/charts/338_h_10.pdf | ||
| + | |||
| + | We know that an asset sale works better for the buyer and a stock sale works better for the seller as is normally the case. A normal asset sale would mean the current corporation would have to stay in existance to collect on the installment sale as I see it to keep from triggering gain on the sale with a liquidation, so I think either solution above will help with that and the current corporation will be absorbed in the new corporation. The seller would only get about enough down payment to pay the tax on the depreciation recapture. I'd like a better solution for the seller. To go to a stock sale seems prohibitive to the buyer as he would have very high basis in S corporation stock with little to deduct until long into the future. | ||
| + | |||
| + | Any help with experience or insight into this type of transaction is appreciated. | ||
| + | }} | ||
Current revision
Discussion Forum Index --> Tax Questions --> QSub Filing Requirements..
Barbeque17 (talk|edits) said: | 14 May 2007 |
| Existing S Corp (Calendar year taxpayer) makes a Q sub election effective 07/01/06. It is my understanding that a final short period S corp return will be filed for the period 1/1/06-6/30/06. On this return, should the ending balances for Sch L. be zeroed out or show the actual balances @ 6/30. Secondly, the new S Corp parent will be filing it's initial return incorporating the financial information from the Q Sub. This return will be filed for the period 7/1/06-12/31/06. On this initial return, should sch L beginning balances be zero? or show the actual 7/1/06 balances of the Q sub? Any guidance is appreciated... | |
| 20 June 2009 | |
| I'm involved between 2 lawyers for both of my clients in setting up a similar transaction for parties that are quite friendly, but trying to find the best solution. This Qsub idea looks like a possible way for theirs to work. Could anyone let me know if it worked out well and if you have any tips for doing it again, especially if you have facts similar to the following.
I have a 25% owner of one S corp that really would like to start his own new S corp and buy the current S corp business. We have been through asset sale versus stock sale. I thought that the stock sale was prohibitive to the buyer because 80% of the purchase price is goodwill. The buyer's attorney thought that the new S corporation could buy the current S corporation stock at a low value and separately buy the "personal goodwill" of the 75% owner that started the company. That was a new idea to me as I thought the goodwill would be considered part of the business sale. He wanted to then see if there could be a 368 liquidation of the old corporation when it was inside the new corporation. What type of transaction would you pursue? Mine has a couple of other hitches as the company was not incorporated until 2006 after being a LLC for a long-period of time. Is that a 5 year rule problem? The other problem is that the new S corporation will be making installment payments to the 75% owner of the former corporation. Any insight into what is a better way to go and where to look next is appreciated? I thank you very much for your time and consideration! Sheldon | |
Harry Boscoe (talk|edits) said: | 21 June 2009 |
| BBQ - I'm pretty sure it's the S corp "parent" that makes the QSSS election. How are these two corporations arranging to become "parent" and "sub" on July 1? There are probably several ways it can happen, and it may shed some light on what should be shown on the balance sheet(s). | |
| 29 June 2009 | |
| The new corporation would end up with the current corporations stock (or all of the assets). 80% of the purchase price is related to current goodwill of the founder of the company with a very near 0 basis inside and outside the corporation.
Since I wrote the above I have been at the following charts and trying to determine which works best. http://www.andrewmitchel.com/charts/rr_2008_18_sit_2.pdf http://www.andrewmitchel.com/charts/338_h_10.pdf We know that an asset sale works better for the buyer and a stock sale works better for the seller as is normally the case. A normal asset sale would mean the current corporation would have to stay in existance to collect on the installment sale as I see it to keep from triggering gain on the sale with a liquidation, so I think either solution above will help with that and the current corporation will be absorbed in the new corporation. The seller would only get about enough down payment to pay the tax on the depreciation recapture. I'd like a better solution for the seller. To go to a stock sale seems prohibitive to the buyer as he would have very high basis in S corporation stock with little to deduct until long into the future. Any help with experience or insight into this type of transaction is appreciated. | |
