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I need tax expert advice for following situation. *NOL Mr. A…

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Second opinion] Hi, My name...
Second opinion] Hi, My name is ***** ***** I need tax expert advice for following situation.*NOL
Mr. A opened a restaurant as a single member manager of LLC in 2009. At that time LLC filed Form 8832 to elect C corp tax status. From 2009 to 2017, LLC recorded business losses and now NOL reached up to million dollars (1 MM). All the source of money came from Mr. A in the form of capital (0.8 MM) and loans from shareholder (0.2MM), so there is no loan from outside.*Shareholder’s personal g’tee
When the LLC signed lease contract for the restaurant, Mr. A signed personal g’tee on it. Now lease contract still alive and restaurant is still there but no business at all. LLC’s 2017 tax return recorded no income but only expenses.
Recently, Mr. A and Landlord settled future lease payments (another 1MM), to be paid FY 2018 and 2019 under installment plan.
Now, I need your professional advice to save money in Mr. A’s personal income tax return.*Tax Plan A
Step 1. LLC files Form 8832 to revoke C corp and elect disregarded entity.
Step 2. LLC files amended 1120 return for 2017 as a final return.
And then, Is it possible for Mr. A to use LLC’s NOL in his future 1040 Schedule C to wipe out other incomes.*Tax Plan B
Step 1. LLC files dissolution.
Step 2. Shareholder, Mr. A claims capital loss from his capital injection and loan from shareholder in his 1040.
Step 3. As for personal g’tee loss, Mr. A claim it as a business loss in his future tax return.
As for capital loss, I read an article saying that only 3,000 dollars per year can be deducted in 1040.
Is this maximum amount can Mr. A claim out of 1 MM capital loss?Thank you for your reading this story and I’d appreciate your knowledgeable and professional answer on above.
Submitted: 1 month ago.Category: Tax
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3/13/2018
Tax Professional: PDtax, Certified Public Accountant (CPA) replied 1 month ago
PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 5,014
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Tax Professional: PDtax, Certified Public Accountant (CPA) replied 1 month ago

Plan A does not work, as the corporate NOL does not transfer to shareholder.

Plan B is half correct. There loans from Mr A to his LLC could be non-business bad debts, with a $3,000 meet capital loss recognition cap.

The loan guarantees you would like to be treated as business bad debts. There are specific requirements for this treatment, which allows ordinary loss recognition. One is that he had to be in the business of loaning money. He was not.

Unless there are additional facts like a compelling reason he made the lease guarantee, this is likely also a non-business bad debt, with the same $3000 capital loss treatment.

Thanks for asking at just answer. Positive feedback is appreciated, five stars is best. I'mCustomer

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