S election mid year

Technical topics regarding tax preparation.
#1
Posts:
56
Joined:
3-Aug-2015 12:55pm
Location:
Orange, CA
I have a client that was a C-Corp and it was sold. The new owner made an S election mid year starting with the date they bought it. Do we file a short year C corp return up to the date of the ownership transfer and then an S Corp return for the remainder of the year?
 

#2
sjrcpa  
Posts:
6471
Joined:
23-Apr-2014 5:27pm
Location:
Maryland
Yes and Yes.
 

#3
Wiles  
Posts:
5052
Joined:
21-Apr-2014 9:42am
Location:
CA
I didn't know that. An ownership change will allow a split tax year?
 

#4
sjrcpa  
Posts:
6471
Joined:
23-Apr-2014 5:27pm
Location:
Maryland
If you timely file the S Election it can be effective on a date of your choosing.
 

#5
Wiles  
Posts:
5052
Joined:
21-Apr-2014 9:42am
Location:
CA
My understanding is that the election can only apply to the beginning of the year.
https://www.thetaxadviser.com/issues/20 ... ction.html
When a C corporation elects to become an S corporation, S status begins on the day following the last day of the electing C corporation's tax year.

Maybe the C-Corp will need to first file for a change in their tax year.
 

#6
sjrcpa  
Posts:
6471
Joined:
23-Apr-2014 5:27pm
Location:
Maryland
I stand corrected.

MoCo - did IRS accept the S election?
 

#7
Wiles  
Posts:
5052
Joined:
21-Apr-2014 9:42am
Location:
CA
Any chance the new owner was an existing S-Corp and made the QSub election on the target C-Corp after purchase?
 

#8
Posts:
1716
Joined:
28-Jul-2017 12:08pm
Location:
Somewhere out there...
“ When a C corporation elects to become an S corporation, S status begins on the day following the last day of the electing C corporation's tax year”

I don’t understand, what does this have to do with the calendar year? Isn’t this simply saying that the years (C and S) don’t overlap?
 

#9
Wiles  
Posts:
5052
Joined:
21-Apr-2014 9:42am
Location:
CA
It's saying you can't create a short C year by electing S status mid year. The election can only be effective at the beginning of the fiscal year (the day after the natural end of C the year)
 

#10
Posts:
56
Joined:
3-Aug-2015 12:55pm
Location:
Orange, CA
Just to make it more complicated. The IRS has not confirmed the S election yet. We have not heard back. Also the C Corporation was a March 31 year end.

It sounds like the S election will be effective starting April 1 of the year?
 

#11
Wiles  
Posts:
5052
Joined:
21-Apr-2014 9:42am
Location:
CA
Perhaps 4/1/22 or maybe 4/1/23. You can still file the 1120-S effective 4/1/22 and deal with late election issues if you ever get a notice. Or send another 2553 with the 4/1/22-12/31/22 1120-S.
 


Return to Taxation



Who is online

Users browsing this forum: beardenjv, Google [Bot], JoJoCPA, UnlicensedTaxPro and 113 guests