- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
Solved! Go to Solution.
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
Deferred Tax asset is a GAAP thing, not tax.
Sounds like the sale of the boat is business income to which the NOL can be applied. Ans selling for 2 million implies there is cash with which to pay tax.
Ex-AllStar
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
No.
( Generic Comment )"
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
Here's wishing you many Happy Returns
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
( Generic Comment )"
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
Your terminology is incorrect, and just serves to confuse the entire issue.
Again - you need tax pro help. NOT internet forum help.
( Generic Comment )"
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
Up until yesterday the Acquiring co. was going to purchase our assets. Now they want to buy the stock instead for our 3ea S Corp entities. We have substantial S Corp Suspended losses which want to utilize for current owner. Thanks so much for your input.
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
S-Corps don't HAVE suspended losses (hardly EVER): the shareholders do.
It seems impossibly for you to grasp this concept.
And if someone is foolish enough to buy the STOCK of a Corp that appears to have as many issues as this one does...I'd take the money and run. Fast. Damn the tax consequences of the *gain* you keep discussing.
( Generic Comment )"
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
Unused losses could potentially be part of a Deferred Tax Asset for GAAP financial statements but otherwise they do not go on the balance sheet as Anna said. Protocol wise, it is appreciated when people say thanks.
Ex-AllStar
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
Optimistic example to calculate C.G: Sales price $2million less B.S. assets of Deferred Tax Asset $400k and misc assets $100k = C.G. $1.5M. I trust this thinking is crazy thinking. BTW the suspended loss is of course $400k. A colleague recommended this approach but I highly question it. I think the only way to handle this scenario is to include a non-compete clause @ $400k. Then this would be ordinary income. Consequently the $400k suspended losses could offset this. Any input is most welcome. THANK YOU!!
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
" ... And we'll ask the company that's buying us"
So, this isn't a client?
I suggest, especially in light of the amounts involved, that professional help be sought (and not via the internet).
( Generic Comment )"
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
That's the MAX for capital gains; the rate is anywhere from 0% UP TO 20%.
But a large capital gain can/usually does have a major impact on the other income on the tax return.
This stuff isn't simple, nor is it black or white.
( Generic Comment )"
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
And we'll ask the company that's buying us to allocate $400k as non-compete clause. Then utilize the suspended losses to offset the $400k. Does this make sense?
Generally no under §1060. You can't alter characters of the income by arbitrarily allocating sales proceeds to non-compete by selling the assets at less than FMV.
As my friends suggest, you should engage a competent tax professional to assist you with this transaction. There is obviously more to this than the initial information you provided in your two posts.
Still an AllStar
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
You do need to get outside advice. In your two posts you ahve said the losses are susoended due to basis and they are due to an NOL.
If the sale of the boat generates business income, 1231 gain and ordinary inome recapture, it increases basis and allows suspended loses to be used,
I question the wisdom of creating $400K ordinary income out an otherwise low(er) taxed 1231 gain. Also.who is doing the selling/noncompeteing? S Corp or shareholder?
Ex-AllStar
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
This entity lost money for years due to interest expense and depreciation of the boat exceeding charter revenue. The last 1-2 years and 2019 finally show profits. So when there's a profit, I apply offsetting amount from suspended losses (with due diligence to basis/at risk) to have net zero effect via Schedule E.
So I'm thinking the only way to utilize the $400k suspended losses will be to create income of same amount.
Won't the sale of boat = a 1231 C.G? Perhaps I'm missing the point. It takes me a few times to comprehend!
Are you saying the sale of boat would result in business income and increase basis?
WAIT A SECOND! I think the lightbulb just went on!!
The 1231 C.G. would be a separately stated income item to increase the basis. With that basis, can use the suspended losses. However the almost $2M C.G. still flows to Form 1040.
Good question on who is doing the selling. Both are options; either sole shareholder selling the S Corp which has little value on the books. Or S Corp just selling all the assets.
BTW, this is only one of 3 entities undergoing this process. All in similar situation.
We won't go there.....