CA PTE Credit Payment in 2022, No other business activity

Technical topics regarding tax preparation.
#1
Wiles  
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Joined:
21-Apr-2014 9:42am
Location:
CA
S-Corp sold all of its assets in 2021. There is a significant capital gain. The sole S-Corp shareholder's entire 2021 personal taxable income will be comprised of capital gain. He is only paying the Fed 20% tax rate 2021.

The S-Corp is not dissolving. It holds other investments that do not generate any income. There is no trade or business activity in the S-Corp after the 2021 sale.

The shareholder and S-Corp do want to take advantage of the new CA PTE tax credit (SALT workaround). (I don't know what we are supposed to call this thing?). Do we make the payment by 12/31/21 and take the Federal deduction in 2021 or wait until 2022?

The shareholder is in the 20% bracket in 2021 and will be in the 37% bracket in 2022. Clearly, we want the deduction in 2022.

But, geez, the 2022 S-Corp tax return will look very strange. The payment is $1.9 million. That will be the only thing reported on the 2022 Form 1120-S.

Anybody see a problem with this?
 

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