1120S Third year no income

[mrichman333]

Ok, I have a woman who came to me in 2009. She is a 1120S, in 09 she had 52,000 in income.

But in 2010, 2011 and now 2012 she had 0 income, but the business still has expenses she is paying.

At what point can she no longer file and take a loss?

[GeorgeM]

Ok, I have a woman who came to me in 2009. She is a 1120S, in 09 she had 52,000 in income.

But in 2010, 2011 and now 2012 she had 0 income, but the business still has expenses she is paying.

At what point can she no longer file and take a loss?

It will all depend on what kind of business it is, and what the expenses are.

[mrichman333]

It will all depend on what kind of business it is, and what the expenses are.

consulting. And it's phone, untilities, insurance, internet.... Total was $4,570

[Arche306]

So what, give the usual disclaimer warning, Forever and ever, Amen ( collect the fee)

[mrichman333]

So what, give the usual disclaimer warning, Forever and ever, Amen ( collect the fee)

sounds like a plan

[jainen]

>>phone, utilities, internet<<

What--no business development activity over all these years without a client? It rather seems like she is mischaracterizing personal expenses as business deductions. How separate are her corporate books from her personal finances? Does the corporation pay her a reasonable salary as required? Other than a corporate structure, in what way is this an actual business?

[Catherine]

There is more than one corporation with no income these days. Clients billed who then skipped out on paying. Clients who keep promising, "_next_ month we'll have the cash to get started on this project," etc.

There are also plenty of sham corporations where folks are trying to deduct personal expenses.

Facts and circumstances! Is she advertising/networking? Have an active web site? Go to Rotary Club, Lions' Club, Chamber of Commerce, BNI mettings? Give "public information" talks that are meant to drum up business? If this - take the expenses.

Or does she stay home on Facebook waiting for her phone to ring? If this -- give up on it!

[ILLMAS]

Or does she stay home on Facebook waiting for her phone to ring? If this -- give up on it!

Funny but probably true...

[OldJack]

The S-Corp must continue to file a tax return regardless of income or expenses until liquidated. The only questions are 1) are expenses distributions or deductible by the S-Corp and 2) are any losses deductible on the 1040.

[Richcpaman]

There is more than one corporation with no income these days. Clients billed who then skipped out on paying. Clients who keep promising, "_next_ month we'll have the cash to get started on this project," etc.

There are also plenty of sham corporations where folks are trying to deduct personal expenses.

Facts and circumstances! Is she advertising/networking? Have an active web site? Go to Rotary Club, Lions' Club, Chamber of Commerce, BNI mettings? Give "public information" talks that are meant to drum up business? If this - take the expenses.

Or does she stay home on Facebook waiting for her phone to ring? If this -- give up on it!

This^^^

If it is a business, then you have to run the business. Why would you incur a dollar of expense for a business going nowhere? Becasue your client is trying to deduct personal expenses. So, there is no profit motive.

Rich

[Catherine]

This^^^

If it is a business, then you have to run the business. Why would you incur a dollar of expense for a business going nowhere? Becasue your client is trying to deduct personal expenses. So, there is no profit motive.

Rich

Again, maybe. I do know someone who set up a corporation and definitely had a profit motive -- and no stomach/aptitude/courage for chasing multiple leads. He would generate interest from some company, give them a dog-and-pony show on how wonderful it would be for them to hire him and his company... and wait by the phone for six months for them to call before giving up hope and slowly searching for a new lead.

His business didn't get very far very fast -- but last I heard he was still _in_ business and over the years (two decades, now, roughly?) he has had some good contracts come out of it. Still, for much of the first years, he sat by the phone waiting for it to ring. And spending money on equipping the business for the big contract that was going to send him to fat city. LOL.

[kcjenkins]

Yes, it is really a 'facts and circumstances' question. It is possible that she is legit trying, even has large receivables, but her clients filed bankruptcy, or just skipped. Ask more questions. We should not be just assuming the worst, but neither should we be blind.