C Corp purchase, new EIN required?

Technical topics regarding tax preparation.
#1
EADave  
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Hello all!

My client and his friend (along with their wives) purchased an existing C Corp from the original owners. The purchase was structured as a stock purchase to maintain DOT authority, etc (it is a trucking company).

My client’s attorney obtained a new EIN to “maintain separation from the old and new owners/federal and state taxation”, but it is my opinion this step was not necessary.

From the IRS Pub 1635:
“ A new EIN is not required if.....
• The corporation is sold and the assets, liabilities and charters are obtained by the buyer.”

This is exactly what happened, no new Charter, just different shareholders. Does anyone agree with the attorney, that a new EIN is required? I think this will muddy the waters.

Also, the new owners want to elect S Status. The Attorney already filled out a 2553 with the new EIN and the old company name and incorporation date. Me thinks this will not pass.

Anyone have any thoughts? Thank you for your time!
Last edited by EADave on 5-Dec-2018 5:57pm, edited 1 time in total.
 

#2
JR1  
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No new EIN.
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#3
Doug M  
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Just think, AT&T must have a trillion bazillion EIN's..........
 

#4
CrowCPA  
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I agree with you entirely. There is no new entity in the scenario you describe. I have seen lawyers do similar things before. While you are at it, make sure the lawyer did not also get a new unemployment account, state tax number, and so on. I would file a new 2553 using the old EIN and write "Corrected Form" conspicuously on it.
 

#5
EADave  
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Crow, the 2553 was not filed as my clients haven’t sign it yet, so that is good news.

Good one Doug, makes sense now! And thank you too JR, hope all is well in the frozen tundra!!
 

#6
Nilodop  
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What was the C corp. exiting from? :D
 

#7
EADave  
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Darn it Len, good catch! Fixed it for ya!
 

#8
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to “maintain separation from the old and new owners/federal and state taxation”

Great logic! I’m going to incorporate that into my annual Tax Magic Show…

“Behold!! Here is Corporation A with this EIN. No assets and lots of liabilities on and off the Balance Sheet. I will now cover Corporation A with this handkerchief. I wave my wand over it, ‘looney dooney dooney,’ and I yank the hanky away. Behold!! All liabilities have vanished and and all creditors have gone away. Worries of unfiled tax returns have disappeared before your very eyes.

How did I do it? A magician never reveals his tricks, but I’ll tell you: While you were focused on the hanky, I went online and applied for a new ID#.
 

#9
EADave  
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Jeff, you had it all right, but you forgot the “Hocus Pocus” part!!
 

#10
Nilodop  
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Darn it Len, good catch! Fixed it for ya!. Thank you. I'll sleep better.
 

#11
Wiles  
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Random thought. Does a Section 338(h)(10) election create a need for a new EIN?
 

#12
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Does a Section 338(h)(10) election create a need for a new EIN?

No, a silly attorney did. H10 would require a corporate purchaser, some guy and his friends and their wives wouldn’t cut it…unless I get my magic wand out again…
 

#13
JR1  
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Legal planning in the rear view mirror I'd call this. If he was concerned about liabilities of the old corp, then YOU DON'T BUY THE OLD CORP STOCK!! Geez.
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#14
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As an aside, but an illustration of how attorneys easily miss the point of stock purchases...

Two of the last three stock purchases I've advised on in the last couple of months have asset allocations included in stock purchase agreements. In the first one, we quickly agreed to remove any reference to asset allocation. The attorney is pushing back hard on the second one citing that it has "tax significance" for his clients. I diplomatically called BS on this and told him if he wanted an asset sale, his client should propose an asset sale. Currently waiting for a response, which I'm guessing will be: "never mind".
~Captcook
 

#15
EADave  
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Capt, bingo again. My client asked me how to allocate the purchase price (for the stock they purchased), specifically how to allocate values across the exisiting assets. I told him it is quite simply a carryover of the assets on the books from the prior accountant, accumulated depreciation and all. The shame of it is, the client's wife is the purchaser and he was unable to attend the closing meeting. So, he was not privy to the new EIN, etc. Also, we now have to combine the books of the prior owners with the books for the last two months of the year to create one tax return; good times!

I just wish the client would've checked with me prior to the closing meeting, but alas, here we sit.
 

#16
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EADave wrote:I just wish the client would've checked with me prior to the closing meeting, but alas, here we sit.


They were probably trying to 'save money'. Well, as is often the case, "pay me now or pay me later"; the work still needs to be done.
~Captcook
 


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