Corp NOL Question

[Snaggletooth]

One year ago, a profitable C Corp, had an unusual $5000 loss. At the time, it was considered uncharacteristic, and the company would return to profitability. So the corp elected to roll FORWARD the loss instead of backward. It is my understanding that when this is done, the election is irrevocable.

Another year has passed, and the 100% owner has had an epiphany of some sort, wants to do something different with the rest of his life, and has decided to abandon the corporation, drawing out the earnings over a period of time. So the last year has passed, and there was another loss, this one for $3500.

The amount showing on the face of the 1040 (line 29) is $8500. We would like to carry back this amount two years. I had thought all we could carry back was $3500. Am I correct? If so, is my software putting the wrong amount in the NOL?

[Roland Slugg]

I had thought all we could carry back was $3500. Am I correct?

Yes.

If so, is my software putting the wrong amount in the NOL?

Well, something is wrong. You should see a $3,500 loss on line 28, $5,000 on lines 29a and 29c, and $8,500 on line 30.

Only the $3,500 can be carried back. The election to forego the carryback of last year's $5,000 loss means that it can only be carried forward.

Although you didn't ask, use F-1139 for the carryback.

[Snaggletooth]

The Saga Continues

Problem not with the software - I did not properly mark some kind of box in 2015 when I made the first election.

But now another problem has surfaced. In 2010 client's grandparents "sold" a tract of land for development purposes, and loaned him the money. After this guys' change of life, he no longer wants to sell the land in tracts or develop it. The terms of the loan were that he was to repay them $9000 every time he sold a house.

So now there is a remaining land value of $41,000 and a remaining loan on the books for $42,000. In the long run, he plans to deflate the corporation of its assets. I would the land (and the loan) be as simple as transferring the land ownership and the loan to his personal affairs.

Accounting-wise this is as easy - just slip away and remove both.

However, the loan was made the corporation, and the land is in the name of the corporation. Now we have complications. With a recorded loan, and recorded land in the name of the corporation, what are the dangers of simply removing them from the corporate books with the slip of the pen??

[BHoffman]

I liked this article: http://www.rhowellsconsulting.com/propertydividends.htm

[Snaggletooth]

Different Problem

Beth thanks for the article, primarily addressing the distribution of property to the shareholder.

My concern, however, is for whatever danger may exist if we write off the land while it is recorded as owned by the corporation. And writing off the related loan while it is still recorded as due by the corporation.

Probably more of a possible legal danger than an accounting issue.

[BHoffman]

I think your client need to get the land and the loan transferred into his name. What if he closes the Corp, sells the land years later and sees the check and possibly the 1099S made out to the titled owner - the closed corporation? Ugh.

[spanel]

Beth thanks for the article, primarily addressing the distribution of property to the shareholder.

My concern, however, is for whatever danger may exist if we write off the land while it is recorded as owned by the corporation. And writing off the related loan while it is still recorded as due by the corporation.

Probably more of a possible legal danger than an accounting issue.

Why would it not be a tax issue. You cannot just transfer the land/loan to the shareholder without a tax implication.

Chris