I'm in over my head and need help in handling these transactions, both from a tax standpoint and an accounting standpoint.
Husband and Wife form a C Corp. Wife is primary stockholder. Corp buys equipment and husband and wife co-sign the note as responsible parties. The asset and note is recorded on the Corp books. Three years later, equip is re-financed with both parties still responsible. Shortly thereafter wife files personal bankruptcy but includes equipment and note as secured debt. Wife also includes unpaid payroll taxes in BK. Six months into BK, equipment is forfeited and Corp ceases all activity. At the time of forfeiture, the equipment has been fully depreciated but has a resale value of $25,000. The outstanding balance on the note is $38K. Payments are made to the BK trustee, all of which is applied to either attorney fees or the finance co. for the equipment. The trustee payments were made from wife's funds, not corp funds.
How are these transactions handled from a tax standpoint and an accounting standpoint? Is the equipment and note transferred to the capital account? Is the capital account debited for the payments that were made for the six months that the equipment is included in the BK. What are the tax consequences of these transactions?
Thanks for any help you can provide.
Husband and Wife form a C Corp. Wife is primary stockholder. Corp buys equipment and husband and wife co-sign the note as responsible parties. The asset and note is recorded on the Corp books. Three years later, equip is re-financed with both parties still responsible. Shortly thereafter wife files personal bankruptcy but includes equipment and note as secured debt. Wife also includes unpaid payroll taxes in BK. Six months into BK, equipment is forfeited and Corp ceases all activity. At the time of forfeiture, the equipment has been fully depreciated but has a resale value of $25,000. The outstanding balance on the note is $38K. Payments are made to the BK trustee, all of which is applied to either attorney fees or the finance co. for the equipment. The trustee payments were made from wife's funds, not corp funds.
How are these transactions handled from a tax standpoint and an accounting standpoint? Is the equipment and note transferred to the capital account? Is the capital account debited for the payments that were made for the six months that the equipment is included in the BK. What are the tax consequences of these transactions?
Thanks for any help you can provide.
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