Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

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Archive for April, 2010

Deadline for Converting C Corp to S

Posted by taxguru on April 20, 2010

Q:

Subject: your article

Mr. Kerstetter,

Allow me to thank you for the information on your blog and website. I have consulted it on several occasion and find it quite helpful.

I have a question about a statement you make in the following article: http://www.taxguru.org/corps/scorp.htm

The article deals with S elections. In the article you say, “…the shareholders must all sign and submit Form 2553 with the IRS to request that status. This can be done right away after the corp is originally chartered, or several years down the road.”

It was my understanding that a company had a limited time period after formation to make the S election and this appears to conflict with your statement above. Which is correct?

With kind regards,

A:

You are confusing two different things related to S corps.

It is true that a C corp of any age can be converted to an S if it meets the criteria.

However, where you seem to be confused is regarding the effective date of the changeover from a C to an S. For example, if an existing C corp (of any age) wanted to convert to S status as of 1/1/10, the 2553 signed by all of the shareholders would have had to be filed with IRS by 3/15/10 at the latest.

A 2553 can always be filed in advance of the effective date; but the deadline that trips most people up is when they want to make the election retroactive to a time before the 2553 is actually submitted.

As I have said many times, I am not a big fan of converting C corps to S. While it is legal to do so, this especially goes for long established C corps because of the many complications of accounting for items carried into the new corp status, such as retained earnings, NOLs, and appreciated assets, with their potential built in gains tax consequences. This is why I normally find it much simpler to set up a brand new corp that can elect the S status with no previous “baggage” to worry about.

As always, any plans having to do with the election or revocation of an S status should be discussed and analyzed very carefully with the assistance of an experienced professional tax advisor.

I hope this helps clear things up for you.

Kerry Kerstetter

Follow-Up:

Thank you, Mr. Kerstetter. That clears things up.

With kind regards,


TaxCoach Software: Finally! Plain-English Tax Planning That Builds Your Business!


Posted in corp | Comments Off on Deadline for Converting C Corp to S

Sit-Com Tax Audit

Posted by taxguru on April 18, 2010

I recently came across an amusing sitcom from Canada called Less Than Kind. In the third episode of the first season, the main family is subjected to a Federal income tax audit that could very easily be taking place in the USA. Some funny examples of how not to handle things, such as literally baking receipts in the oven.

I edited my copy of the episode down to just the audit scenes and uploaded it to YouTube.

Posted in audits, video | Comments Off on Sit-Com Tax Audit

Posted by taxguru on April 18, 2010


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Posted by taxguru on April 18, 2010

Kill the Death Tax, Once and for All

With the wholesale acceptance and furtherance of the planks of the Communist Manifesto by the DemonRats in power, the chances of them killing this particular plank are slim.

If this article by Deroy Murdock is correct that the only real debate between the Dims and the GOP is the rate and starting point for this evil confiscation of wealth from Americans, what good is the alleged “opposition party?” Marxism-Lite is just as bad as the full blown Marxism our DemonRat rulers are hell-bent on implementing.

Deroy echoes my sentiments for the past three decades, as I have supported the abolition of the current income and estate taxes in this country.

This entire nation would benefit if all of this legal, accounting, and finance talent — plus the resources required to pay them — instead could be devoted to more productive purposes.

I have long said that there would be no shortage of meaningful work for those of us in the accounting profession if taxes were eliminated. Unfortunately, we still have to devote more and more of our time and other resources to assisting clients in protecting their assets from more and more insidious methods of government confiscation.

Posted in Commies, DeathTax | Comments Off on

Posted by taxguru on April 17, 2010


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PhotoShopping Tax Day

Posted by taxguru on April 16, 2010

Freaking News has 31 examples of taxes being taken as a percentage of items the taxpayers own, such as this method of dealing with Pamela Anderson’s tax debts:

FoxNews has 14 examples of Tax Day creations.

Posted in comix | Comments Off on PhotoShopping Tax Day

Posted by taxguru on April 16, 2010

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Tax Day Jokes

Posted by taxguru on April 16, 2010

Courtesy of the folks at NewsMax, who have the stomachs to watch these shows.

Craig Ferguson:

It’s fitting that April 14 is National Pecan Day because today, we recognize nuts. And tomorrow, on April 15, we pay our taxes to support them.

If no one paid their taxes, imagine what it would be like: America would be broke — more broke.

Jimmy Kimmel:

Tomorrow is the day to mail in your tax returns, which means tonight is the night to start making fake receipts.

It was tax day today. Don’t forget to set your bank account back $10,000 tonight.

The government wants us to count how many people live in our home, and then to calculate how much money we owe them. I actually got confused and sent a check to the census and a member of my household to the IRS. Sorry Grandma, we’ll get you back.

Larry King has filed for divorce from his wife, Shawn. He may have thought he was filing taxes, I don’t know.

Jay Leno:

It’s April 15, the day we all curse like Joe Biden.

President Obama turned in his tax return today. He didn’t owe a lot because he has a lot of dependents: his wife, two daughters, AIG, General Motors, Goldman Sachs.

Posted in humor, TaxDay | Comments Off on Tax Day Jokes

Posted by taxguru on April 15, 2010

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Posted by taxguru on April 15, 2010

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