I’ve a 7-year old loss that is about to expire. Know a creative way to make a deal with rich Company B?
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The loss is $100,000. If Company B has income, can they buy something from Company A for $100,000? Company A can then lend the money back. Company B benefits from an income tax deduction. Some time later when Company A is making money they can reverse the deal. Does this work?
This is a net operating loss for a private commpany registered in BC. R&D has produced $10 million of value, so liquidation is out of the question.
May 27th, 2010 at 3:33 am
It can work. Can strike a futures contract with 100,000 up front. The problem is…who is going to believe you? thats why you give collateral…but what will you work with? and not every company is in the business to do pawning..you see what i mean? I guess the other company has to be your friend……
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May 27th, 2010 at 4:29 am
What kind of loss is this? A net operating loss? Capital loss? And what type of business entity is Company A: C-corp, S-corp, LLC, etc?
Off the very top of my head, I cannot recall a loss with a 7-year expiration period. Net operating losses are carried forward for up to 20 years. (See link below for more information on corporate net operating losses.)
If Company A is a C-corporation, I would suggest that the corporation liquidate. That would leave shareholders with a loss of at least $100,000. Individual shareholders of a small C-corporation can take a one-time deduction for losses on small business stock of up to $50,000. This is called a “Section 1244″ loss. CPAs generally prefer to certify that the company is eligible for Sec 1244 treatment before advising a liquidation.
I would see a CPA or small business tax accountant immediately. You don’t want to sell, liquidate, or make other tax moves without proper counsel.
William Perez
taxes.about.com
http://www.irs.gov/publications/p542/ar02.html#d0e1743
http://taxes.about.com/
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