Ralite Decison in CA

[rfk]

Does anyone know of the effectiveness of using the Ralite decision to "walk away" from an S Corporation status, whereby the client has not filed, and I have heard that this decision may be used to avoid CA's franchise fee of $800 for the years not filed?

I would like to utilize this decision if all things regarding this decision are in place for doing so. I did go to a "mini-seminar" about closing corporations, etc. where it was discussed, but I want to be sure that this decision is truly usable for quasi-closing purposes.

Thanks for your help!

rfk

[DTS]

Rfk

I've done this twice with regards to the annual fee and closing (not sure what you mean "walking away"), but cannot remember the form I filed, but you can find it on the SOS site and very easy to fill out. The fee was avoided both times. If memory serves me, this is a timing issue, so this will come into play.

There may be a tidbit in here to answer your question, but not sure about that. Check this out and if you are not satisfied, call the CA hotline : (916) 845-7057.

http://www.taxalmanac.org/index.php/Discussion:CA_LLC_Fee_deductable%3F

I hope I've understood your question and was able to help, but if not, maybe, jump back in with more detailed info.

D

[DTS]

Another thought

Was this the first year for the S-corp? If so, the fee for S-corp the first year is a measured tax, not the annual $800. Would there be tax for your client, if this is the case?

D

[DTS]

rfk

I'm not sure I understood the intent of your post. I thought I did, but probably not. I did more research for you and found this link, which gives you a brief explanation of this case and within this link is another link to BOE.

Scroll down about halfway down the page for this posted question. Check out the BOE link to make sure the info is correct.

http://www.taxquips.com/podcast.php?cat=TaxQuips

Here is the article link to BOE:

http://www.boe.ca.gov/legal/pdf/90_sbe_004.pdf

Probably, best to ignore my two previous posts and look here. Hope this one helps.

D

[rfk]

Going to review but...

essentially, the taxpayer formed the S corporation in TY 2005, but really did not transact any business actively (except a few items) in the corporation. Does have a bank account. I asked him if he really needed the corporation to exist and he said that he really did not. So I am trying to assist him in "walking away" from the corporation using the Ralite decision. This is to avoid the fees and filing returns for the corporation; thus walking away.

It is my understanding that one could close an inactive corporation by not filing any of the returns, and correspondingly not doing any activity as well. So I want to be sure and do this right with regard to advising him in a non-legal way, from a tax standpoint.

rfk

PS: Thanks DTS