C Corp mess

[Unregistered]

A client that I do only their individual return called and stated that he and his wife (the only shareholders in a C-Corp) had sold their shares during 2005 to another husband/wife. The new shareholders did keep the same tax ID number, etc. My client said that the new shareholders filed the C-Corp return themselves and only filed from the date of their purchase. They issued W-2's, 1099's, etc, to the employees that worked there after they bought the stock in the company. The old employees are screaming for thier W-2's and so is my client's wife. Some of the employees were retained by the new shareholdes but their W-2 is only reflecting the income they received after the new sharholders bought out my clients.

Does anyone have any idea how to straighten out this situation? The CPA that has been doing the C-Corp return for my client has told them that she won't even talk to them about this more until they are ready to hire a tax attorney regarding the non-filing of the C-Corp for the entire year by the new shareholders. Does this sound like an accurate response to the client?

[rosieea]

Someone needs to convince the new owners that an 1120X and corrected W-2s & 1099s are in order.

[Matt Sova]

Sale of business

There are basically 2 ways to purchase a business.

1) Purchase the assets of the business. This will result in the formation of a new corporation. Employees will receive 2 W-2's and each Corporation will file a tax return.

2) Purchase the stock of a corporation (your case). In this instance the corporation does not cease doing business. If you went out and purchased 100% of the stock in General Motors Corporation you would own the company in full. However, the employees would not receive a W-2 from prior to your purchase of the shares and one from after. The corporation remains whole and it's life continues.

They need to file an 1120X and redo all W-2's and the W-3. If the previous owner never paid in payroll taxes, guess what, the new owner is responsible.

Matt

[JON]

Someone tell the buyer???

Someone has some bad information and advice. Whoever has a copy of the purchase agreement should give it to the other showing that it was a STOCK sall or maybe an asset sale. If it is a stock sale and they refuse to do things right then get the attorney or the IRS to encourage the correct information be filed. Remember your client did not receive any of the receivables or pay any of the payables that were on the books at the date of the stock sale. Should be easy to remind parties of what the agreement says. Were any attorneys involved????????/

[Bird Legs]

Corp. Mess

Was anything filed with the State reflecting a change in officers?

[Unregistered]

There are basically 2 ways to purchase a business.

1) Purchase the assets of the business. This will result in the formation of a new corporation. Employees will receive 2 W-2's and each Corporation will file a tax return.

2) Purchase the stock of a corporation (your case). In this instance the corporation does not cease doing business. If you went out and purchased 100% of the stock in General Motors Corporation you would own the company in full. However, the employees would not receive a W-2 from prior to your purchase of the shares and one from after. The corporation remains whole and it's life continues.

They need to file an 1120X and redo all W-2's and the W-3. If the previous owner never paid in payroll taxes, guess what, the new owner is responsible.

Matt

There is a way you can treat as ASSET buy even though it was STOCK buy. There is a court case. This may help the situation. I do not have time to do the research at this time. But an extension would help.

[JON]

Buyer can elect to treat as a purchase

but he still continues with ID numbers and pays taxes on the recapture and gains fro the step ups. That is subsequent to the purchase, but your still liable for everything in the acquired corporation back to day one.............

[OldJack]

Asset sale form 8594

Both the seller and purchaser of a group of assets that makes up a trade or business must use Form 8594 (Asset Acquisition Statement Under Section 1060) to report (corp return or personal return) such a sale if goodwill or going concern value attaches, or could attach, to such assets and if the purchaser's basis in the assets is determined only by the amount paid for the assets.

Form 8594 must also be filed if the purchaser or seller is amending an original or a previously filed supplemental Form 8594 because of an increase or decrease in the purchaser's cost of the assets or the amount realized by the seller.

Therefore, if it was an asset sale form 8594 should have been filed but that is not necessary if it was a stock sale. Form 8594 is required for allocating the agreed upon sale price to various classes of assets such as receivable, inventory, equipment, and goodwill.