foreign corp for state, apportionment

Technical topics regarding tax preparation.
#1
dwelks  
Posts:
34
Joined:
26-Aug-2015 6:12am
Location:
KY
A client had a single member LLC (Schedule C) for all of 2015 and 2016. During that time he was a full-time New York resident.

In March 2017 he filed articles of incorporation to form a new corporation in Delaware (not my idea) and filed Form 2553 to elect S corp status. The IRS approved the S election as of March 2017.

The client planned to move from New York to Boston sometime in 2017 but wasn’t sure when. The plan was to not have any activity in the S corp and keep all the activity on his Schedule C for 2017.

In April and May 2017, client contracts with two customers through the S-corp and the customers pay the corporation. We’re talking $40,000 in gross revenue, $2,000 in expense that went through the S corp. The customers never issued a 1099 as the payments were made to a corporation and therefore no filing requirement.

From June through the rest of 2017, client does business through his Schedule C. In September 2017, client moves from New York to Boston. He registers the corporation with MA as a foreign corporation.

By the end of 2017, client had contributed all the assets of his Schedule C to the S-corp (primarily cash, a computer, desk and chair). All activity will be conducted through the S corp going forward.

To recap, the client has a Schedule C that, for state purposes, is apportioned based on where the services were performed: Jan-September in NY; September-Dec 31 in MA. Client has no payroll in 2017 and property is minimal.

The 1120 shows $38,000 that flows through on the K-1. Based on the apportionment, the NY state K-1 is showing $38,000 and the MA state K-1 is showing zero apportionment.

To clarify, the client is also going to file a Delaware S-corp return because that is the state in which it's organized.

The client never filed paperwork with NY to show that the corporation was organized in Delaware and was thus a foreign corporation doing work in NY.

Questions:

1. How should the client address the lack of filing as a foreign corporation in NY?

2. Any issues with the way the income was apportioned on the state K-1s?

3. The transfer of assets from the Schedule C to the S corp should qualify as tax free under Section 351, correct? Does a statement need to be attached to the 1040 or the 1120S, or both? Does any specific wording need to be included?

Thanks so much for your help.
 

Return to Taxation



Who is online

Users browsing this forum: beardenjv, Google [Bot], JoJoCPA, kyle242gt, NGeorgiaCPA, Nilodop, Permanently-Diff, TexasTaxCPA, Trailman423 and 135 guests