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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16538
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I need to know if I can adjust monies that came into a bank

Resolved Question:

I need to know if I can adjust monies that came into a bank account for a dormant C Corp and consider them as monies for a new C corp (with a fresh start and new shareholders) for 2013?

The business of the old C corp changed as did everything including the shareholders. I would rather start from scratch with a new company, but I did initially have funds that were borrowed and spent, put into the old C corp account for 2012 and thus far in 2013.

I'd like to allocate on the books that those funds were for the new corporation and dissolve the old one in 2013.

Can I allocate monies which were initially put into the old C corp to the new one, and have that fresh start, instead of mixing an old C corp and it's non-existent business with the new.

I should have started it fresh from the beginning, but at that point, I had thought that I could just use the company that I already had and I did not consider tax implications (benefits of 3 years startup) and reallocating shares....would affect everything.

What can I do? I'd like open the new C corp and consider any activity in that account in 2012 and 13 as part of the new corp.
Submitted: 2 years ago.
Category: Finance
Expert:  Megan C replied 2 years ago.

MyVirtualCPA :

Thank you for your question, and thanks for using JustAnswer.com

MyVirtualCPA :

The problem is that you can't have activity from a period prior to a new corporation being formed put into that corporation

MyVirtualCPA :

So, if you received a check on May 30, and opened your new C Corp on June 1, you couldn't allocate that May 30 check to the new corp

MyVirtualCPA :

Does that make sense?

MyVirtualCPA :

So, once you open up the new corporation, then you can start fresh but not until then

MyVirtualCPA :

You will have to have the activity allocated to the old corporation unless the new corporation was already open and functioning at that point

Customer:

That is what I had figured....
So, I if I want to have a fresh start, I'd need to move the shareholders over to the new corp...allocate what they contributed in the "old" corp as part of the new corp and close the old corp in 2013?

Customer:

We haven't had any income yet. All money has been either capital contribution for shares or loans.

MyVirtualCPA :

Yes, that's what you would have to do

Customer:

I could adjust that to the new corp and close out the old one, then?

MyVirtualCPA :

Yes, you could

Customer:

And as long I as I keep the share percentages the same, it should be pretty much a equal transition to the new corp.

MyVirtualCPA :

That is correct

Customer:

My question there would be, if they contributed in 2012 to the old corp, but I allocate that contribution to the new corp (even though the money was given in 2012) it is the same difference in terms of capital contribution---so long as they are not short term holders?

MyVirtualCPA :

yes, that is correct

Customer:

ok. So I'll file the taxes for 2011, 12 and 13 with 13 checked as the last return for the old corp. I know I'm late! Nevertheless, if they contributed funds as shareholders or as notes, that is not considered income for any of these years, correct?

Customer:

That's my last question on this

MyVirtualCPA :

That is correct - contributions and loans are not taxable income to the corporation

Customer:

ok...sorry one more, if there was 5k left in the bank (from this contribution or loan) is that considered an asset at the end of the year? Or if it was a loan, is that an asset because there was 5k in the account at the end of the year?

Customer:

now i'm done....

MyVirtualCPA :

Okay - if it was loan you would have a $5,000 asset and a $5,000 liability

Customer:

I see. Ok. Thank you!

Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16538
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Megan C and 2 other Finance Specialists are ready to help you
Expert:  Megan C replied 2 years ago.
Thanks, Daniel for your positive rating. Please come back and visit MyVirtualCPA for any of your tax, finance, or social security needs. It was a pleasure working with you today.