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Filing final corporate tax returns

I am helping a small company file its final corporate return as they are closing done the business. The final return is for the year ended 12/31/13. The balance sheet at 12/31/13 has a small amount of cash, some fixed assets and some notes payable. The cash will be used to pay the final taxes due. On the tax return can the final balance sheet have balances in these accounts or should the final balance sheet accounts all be zero? Will another return have to be filed for 2014 to reflect the payment of the 2013 taxes and to zero out the accounts?

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Topic Expert
Keith Perry
Title: Consulting CFO and Business Operations A..
Company: Growth Accelerator
(Consulting CFO and Business Operations Advisor, Growth Accelerator) |

Anon,

It depends on the situation, but I believe the answer is "yes, if you have a transaction in 2014, you'll need to file a stub tax return to cover that".

Basically, file 2013 taxes, pay them, liquidate everything, distribute that to the owners, file a final "stub" return immediately describing the liquidation, and you should be at $0 unless you took a gain on something. For that reason, you might well want to liquidate before you file 2013.

Note, it can happen that you pay tax in 2013, the Stub creates a loss, and you end up with cash again from the refund on the lookback...sort of an endless cycle.

To avoid that problem, you might stick the cash in escrow and have the owners agree to pay the taxes then distribute the remainder. That gets you to the $0 balance sheet, but it depends on your situation.

KP

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