Technical topics regarding tax preparation.
17-Aug-2022 1:44pm
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I am pretty sure this is a no-no.
Client has a CA C-Corp that has been operating for many years. They moved out of CA and have been operating in MT for several years. They have recently set up a new corporation in MT using the exact same name in that new corporation. They want to close the CA C-Corp and just continue operating as before but now under this new MT corp.
What is the harm in them using the old corp's EIN in the new corp?
17-Aug-2022 2:01pm
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Wiles wrote:What is the harm in them using the old corp's EIN in the new corp?
Probably no harm actually. That doesn't mean it's in accordance with what the IRS says you're supposed to do.
17-Aug-2022 2:28pm
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They should probably legally merge the CA corp into the MT one.
17-Aug-2022 2:36pm
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Even that, I think you still are supposed to get a second EIN
17-Aug-2022 3:20pm
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You're supposed to. The SS-4 asks for the state of incorporation so the IRS records will still show the CA corp.
It might also be weird to show a federal return with the incorporation date different than what shows on the state return.
17-Aug-2022 4:35pm
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I was thinking some kind of reorg.
17-Aug-2022 4:59pm
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Yes. There should be some way in the reorg world to end up with a MT corp using the same EIN.
I know that CA has some weird rule that does not allow a corp to simply re-domesticate to another state. This why they set up the new corp in MT.
17-Aug-2022 5:35pm
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This is that "weird" rule.
https://casetext.com/analysis/legislatu ... onversionsChapter 11.5 of the California General Corporation Law currently authorizes the conversion of a corporation into an "domestic other business entity" (defined in section 167.7) such as a limited liability company or a partnership. While a "foreign other business entity" (defined in section 171.07) may be converted into a "corporation" (generally, a corporation organized under the GCL), the GCL does not presently authorize the direct conversion of a "corporation" into a foreign corporation (defined section 171) or a "foreign other business entity". Nonetheless, such conversions were not impossible as corporations could achieve the result by first converting into a California limited liability company and then converting into a "foreign other business entity" pursuant to Corporations Code Section 17710.02.
But see that last sentence..
So we convert the CA Corp to a CA LLC, then we convert to a MT LLC. Voila! Taxpayer has a MT LLC (taxed as corp) with the same EIN.
17-Aug-2022 6:32pm
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Another idea using reorgs...
Have the CA Corp create a MT Corp as a subsidiary. Then do a downstream merger into that subsidiary. Merge out the CA Corp with the CA Secretary of State.
17-Aug-2022 7:16pm
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Sec 368(a)(1)
(F) a mere change in identity, form, or place of organization of one corporation, however effected;
, affectionately known as an F reorg.
Strongly suggest reading reg. 1.368-2(m). It's long but good.
You will not need a new EIN if any of the following are true:
***
After a corporate reorganization, you only change identity, form, or place of organization
https://www.irs.gov/pub/irs-pdf/p1635.pdf
17-Aug-2022 7:56pm
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How would an F reorg maintain the old (CA Corp) EIN in the new (MT Corp) entity?
The shareholders corporation would need to get a new EIN for NewCo.
Last edited by
Wiles on 18-Aug-2022 12:21pm, edited 1 time in total.
18-Aug-2022 11:52am
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Wiles wrote:The shareholders would need to get a new EIN for NewCo.
Since when do shareholders of corporations get EINs?
18-Aug-2022 11:56am
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dellpaul wrote:Wiles wrote:The shareholders would need to get a new EIN for NewCo.
Since when do shareholders of corporations get EINs?
The shareholders would elect a board of directors (or an initial board would be specified in the articles of incorporation), who would appoint officers, who would apply for the EIN on behalf of the corporation.
18-Aug-2022 12:19pm
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So why can't the corporation keep its EIN as described by Nilodop in post #10?
18-Aug-2022 12:20pm
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dellpaul wrote:So why can't the corporation keep its EIN as described by Nilodop in post #10?
See #11
18-Aug-2022 12:27pm
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So you are saying it is not an F reorg . . .
18-Aug-2022 12:31pm
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I am asking how, using an F reorg, accomplishes the transfer of the EIN to the new entity and the old entity going away.
18-Aug-2022 12:52pm
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I am not sure that I understand your question. The IRS says that an EIN carries over in an F reorg.
18-Aug-2022 12:58pm
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See the chart in this article:
https://velawoodlaw.com/what-is-an-f-reorganization/In the final structure, the prior entity remains. That's the "Disregarded Entity LLC" at the bottom of. That's the old entity that is continuing to use the old EIN. That is what the IRS means by the EIN carries over.
But we need this entity to go away.
The "New Corp Hold Co" at the top of the chart will be the surviving entity. But I believe they will have to get their own EIN.
18-Aug-2022 1:06pm
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Why are you complicating the analysis with disregarded entities? Don't you just have "a mere change in * * * place of organization of one corporation"?
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