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PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4670
Experience:  35 years tax experience, including four years at a Big 4 firm.
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I started a Delaware C-Corp last year with the intention of

Customer Question

Hi there,
I started a Delaware C-Corp last year with the intention of starting a business, however the company never got off the ground. I was the sole shareholder.
As I explored, I incurred several thousand dollars of expenses (paid out of personal funds). My current thought was to dissolve the C Corp ("Before Beginning Business" - company meets the qualifications for short-form dissolution) and call it a day, but is this the right approach to maximize tax efficiency? Can any of these expenses (incorporation fees, computing costs, software, etc.) be deducted in any way?
Thanks in advance!
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
As a quick follow-up. Given that I'll be dissolving the company in the coming days, will I need to file federal taxes for both 2015 and 2016 for it (there won't be any taxes owed, but the company did exist beginning in 3/15)? Maybe just for 2015? Possibly neither? I understand the fees fees I'll need to pay to the State of Delaware... just not the Federal side.
Expert:  PDtax replied 1 year ago.

Hi from just answer. I'm PDtax, and will assist.

While the amounts you advanced to your corporation would be expenses of the corporation (with no income), you get a tax deduction when you dissolve the corp fit the monies you advanced/invested.

Expert:  PDtax replied 1 year ago.

You're $2,000 in advanced and $800 in original capitalization means you have an investment, and a tax loss, personally. It is a capital loss you can use against your other income.

Expert:  PDtax replied 1 year ago.

You need to file the 2015 and 2016 returns to support the loans and investments, buy this means the corp only had its existence fees to pay, and tax return preps. You get a deduction for essentially everything you spent.

Thanks for asking at just answer. Positive feedback is appreciated. I'm PDtax.

Customer: replied 1 year ago.
Thanks PDTax,How should the funds be represented in the C Corp filing? Does a promissory note need to be in place? Given that I'm the sole shareholder, will this raise a red flag?Thx!
Expert:  PDtax replied 1 year ago.

A promissory note is best. No red flag or audit risk as long as you have solid paperwork. You can prepare it yourself, and attach copies of the bills and your payments.

One note about audits. IRS has had to cut their staffing levels dramatically over the last few years. They rely on other ways to collect taxes. Audits are way down. Especially for a closed business with little potential for taxes. Assemble your best records, and support them with a promissory note. You should have very little audit risk.