C-Corp winddown tax questions
Approximately seven years ago I started a business by creating an Pennsylvania C-Corp of which I am the only officer and sole shareholder. I capitalized the venture with $100,000 of capital stock (rolled my 401k assets into the new corp 401k plan) and a $500,000 SBA loan (with personal guarantee). Over the ensuing three years, I injected $60,000 in shareholder loans to keep operating, plus took out a second SBA backed loan of $40,000 to expand.
In 2013 I was unable to make the loan payments. The bank "forced" a sale of the business as a going concern, seized & auctioned most of the remaining assets, and issued a 1099-C for the $XXX,XXX shortfall.
Throughout 2014 I operated the business in a significantly reduced capacity using the assets the bank had not taken. In late 2014, my new wife (we married after I started the business) purchased the balance of the assets plus some of the goodwill and paid off the smaller SBA loan. The bank is aware that one loan was paid off but did not issue a corrected/amended 1099-C, so I did not file an amended TY-2013 return. All 2014 profits went towards paying down shareholder debt, and I did not list that as amount income on my personal return.
I operated in 2015 using the assets owned by my wife, and again booked the profits to paying down shareholder debt.
So, now I have a C-Corp with no physical assets, $20,000 in goodwill, $53,000 in shareholder loans, and -$40,000 in equity ($101,000 capital stock and -$139,000 retained earnings) on the books.
I did reduce the value of stock to $20,000 on the TY-2014 1120 (I used QB Corp. for past two years) and (assume) I need to keep doing that so I can close out the 401K without penalty.
*We were married after I acquired the business and debt, and have a pre-nuptial agreement that neither was party to the others debts or assets.
*We have been filing joint returns since marriage. In 2014 a refund that should have gone to my wife (her income, her mortgage interest & property tax expenses) was retained by Treasury. I have yet to file an injured spouse form to recover that money.
*The outstanding $XXX,XXX debt has been referred from SBA to Treasury for collection. There is no possibility that I can pay it off and I am waiting on a response to a $XX,XXX settlement offer, which would again be funded by my wife.
*I did work for another company for a brief period in 2015, and wages were garnished by a collection agency for the Treasury debt.
*I created a sole proprietorship in 2015 (in case I needed to do business that way) but haven't filed any TY-2015 returns yet.
Where do I go from here? What are the options? I haven't ruled out bankruptcy as I'm beyond the stage of needing to apply for a mortgage. Any and all input is appreciated.
Last edited by R1200R : 04-01-2016 at 02:42 PM.