Corporation, no activity

[DaveinTexas]

I have a new client that needs to dissolve his corporation. The corporation was formed in March of 2007 and never transacted business, never had assets, never issued shares and never had shareholders, officers or directors. No revenue was earned and no expenses were paid and there are no liabilities for the corporation.

I remember reading somewhere that a corporation first exists, in the IRS's eyes, when the corporation has assets, shareholders or transacts business. None of these events occurred.

That being said, should I file a 2007, 2008 and a short year 2009 return or will I be safe with just filing a 2009 short year return, initial and final?

TIA

[Snaggletoof]

State Tax

I think if the corporation was formed and given life by the Secretary of State in Texas, that office will forward a record of its existence to the state department of revenue. Most likely, some sort of franchise tax (a corporate tax NOT based on profits) would be due, and you may get a letter from a taxing authority if you don't file.

If a charter was never submitted to the Secretary of State for formation of the corporation, your client might just do nothing and get away with it. He has so far.

I realize I haven't answered your question about the Federal return.

[Burke]

These are two separate issues. If the corp was chartered by the state, then there is generally paperwork to be filed and fees to close it out, which they require. As far as the tax returns are concerned, if a federal EIN was requested and issued by the IRS, the client got a letter specifying the type of tax return due and the due date. I would do a paper filed tax return with zero figures, show Initial and Final and send it in to get out of the IRS computers. It would not hurt to put a cover letter with it to explain.

[DaveinTexas]

Thanks folks

I just worry that a late filing fee, this corporation is an S Corporation, will apply. I suppose there is nothing stopping this because the returns are indeed late if they are due.

I thought I might should file 3 returns with $0.

Thanks for your help.

[JohnH]

What would be the effect if a disqualifying event happened early after the filing of the 2553? Then there would not be an 1120S due for the 2007 and 2008 years, thus no penalty. If it never had assets, never had shareholders, and never had any activity, then the 2553 itself was defective.

[DaveinTexas]

Dog gone

That's a term used here in Texas, John you are right on the money. If the corporation never had shareholders, then the 2553 is invalid and the election is invalid. Come to think of it, he never received a confirmation letter from the IRS regarding the election.

I may consider that route.

Thanks for your help.

[JohnH]

There's a saying we have here in NC that might help explain my answer.
"Even a blind hog will stir up an acorn if you let him root around long enough".

[ChEAr$]

If

What would be the effect if a disqualifying event happened early after the filing of the 2553? Then there would not be an 1120S due for the 2007 and 2008 years, thus no penalty. If it never had assets, never had shareholders, and never had any activity, then the 2553 itself was defective.

a corporation were formed, it HAD to have at least one shareholder at inception.
That is a state requirement and minimum capital requirements must be met.