S-CORP WITHDRAWN FROM CA , MOVED TO VA

[HOPE2]

Hi everyone,

S-corporation was formed on 01/03/2022 in California and operated there until 01/29/2025, when it moved to Virginia.

From 01/01/2025 to 01/29/2025, the company had $1,500 of income and $3,500 of expenses. As in prior years, the company also has depreciation on three assets. The date in service for three assets is for 2023 and they  ( office improvement - furniture and an equipment) all of them remained in CA. 

The S-corporation has only one shareholder, who was a Virginia resident as of 01/01/2025. On 01/29/2025, the shareholder formed the S-corporation in Virginia, and on the same day terminated/withdrew the S-corporation from California.

I understand that I should file one federal return and two state returns (California and Virginia). I need help understanding how to correctly file the federal, California, and Virginia returns, making sure that California income is limited to the 29-day period. The numbers in CA return are different the Federal return!! Also, what should I do for depreciation assets, and how about the K-1s?

Can someone explain the correct approach?

[sjrcpa]

Unlike individuals, you don't cut off income and expenses when a corporation reincorporates and operates in another state.

You apportion the net income. Look at the apportionment schedules for the CA and VA returns. Most states are using sales factor apportionment only, but some still use sales, property and payroll. VA uses all 3.

[BobKamman]

Your question assumes there is just one company but then states that there are two.  I would file a final California return for Company 1, through date of dissolution.  And, an initial Virginia return for Company 2, starting from its date of incorporation.  You might also have to file a Company 2 return with California, if it continues doing business in that state.  And, a Company 1 return with Virginia, if it was already doing business there.  

The shareholder, of course, will receive Schedules K-1 from both companies.  Either of them may show income from both states.  

[sjrcpa]

good points @BobKamman 

I was assuming this was an F Reorg, which it probably is.

IRC 368(a)(1)(F) a mere change in identity, form, or place of organization of one corporation, however effected; 

[BobKamman]

That may be what they were trying to do, but why leave the assets behind in California?  Not apparent whether they are even still in business use.  

Did they get a new EIN?

[HOPE2]

Thanks Look at the apportionment schedules for the CA and VA returns, where can I find them?

[HOPE2]

Hi everyone,

S-corporation was formed on 01/03/2022 in California 

and operated there until 01/29/2025(terminated)

On 01/29/2025 with same name same EIN started in VA 

From 01/01/2025 to 01/29/2025, the company had $1,500 of income and $3,500 of expenses for CA part since termination date is 01/29/2025

 As in prior years, the company also has depreciation on three assets. The date in service for three assets is for 2023 and they  ( office improvement - furniture and an equipment) all of them remained in CA. 

The S-corporation has only one shareholder, who was a Virginia resident as of 01/01/2025. On 01/29/2025, the shareholder formed the S-corporation in Virginia, and on the same day terminated/withdrew the S-corporation from California.

I understand that I should file one federal return and two state returns (California, short-term  and Virginia, short-term as well).

I need help understanding how to correctly file the federal, California, and Virginia returns, making sure that California income is limited to the 29-day period. The numbers in CA return and VA return are different the Federal return!! Also, what should I do for depreciation assets, and how about the two K-1s? can enter two k-1 under one company in his 1040?

[sjrcpa]

Refer to my original answer. You don't cut off at 29 days. You pro rate.

Did the depreciable assets move to VA?

[BobKamman]

In what states does the corporation do business?  Are the depreciable assets no longer used in the business?  What is the source of your understanding that only one federal return needs to be filed (is your client giving you that advice)?

[HOPE2]

Yes 2 assets moved to VA and the other one it is improvement of office which convert to rental space, but already I mentioned they stayed in CA it is my bad. What can I do for them?

[HOPE2]

I already mentioned in my post :🤔

S-corporation was formed on 01/03/2022 in California 

and operated there until 01/29/2025(terminated)

On 01/29/2025 with same name same EIN started in Virginia.

Two of them were furniture and computer moved to VA

one was improvement of office that was part of office convert to rental after moving to VA.

You think we can file many Federal tax returns!

[HOPE2]

When I prorate income and file one federal return and two state returns, the amounts that flow to Virginia and California are different from the prorated amounts. As a result, when the California Franchise Tax Board reviews Form 100-S and Form 1120-S, none of the numbers match. The same issue occurs with Virginia. What is your insight on this?

[BobKamman]

Where. Does. The. Corporation. Do. Business.

Not where is it located.  Where are its customers?  Are they all still in California? 

[HOPE2]

ohh, got it, sorry

Scorp been located and did  business in CA 01/01/2025- 01/29/2025 ,Customers all around the nation. ( Scorp formed on 01/03/2022 in CA)

Corp located and does business in VA from 01/30/2025 till now and 

Customers all around the nation

Same name same EIN 

[BobKamman]

You might have to be filing tax returns all across the nation, then. 

The aroma I get here is that the client had competent legal help that helped him with a 381 reorganization and then told him "tell your CPA that it's still the same company, he'll know what to do."  If this is a small company with average monthly income of $1,500, as in January of last year, then maybe it's easy to figure out.  But if it takes in $15,000 in other months, let's say from clients in New York and New Mexico, then you have a lot of work ahead of you. 

I have a client who is an Arizona resident but owns 50% of a California LLC taxed as an S corporation, that does business mostly in California but also in several other states.  They file returns in all of them.  It's all too complicated for me, so I do the personal returns but leave the 1120-S and K-1s to a California CPA. And this client is my son.  

[HOPE2]

Sorry unclear for me 

[HOPE2]

Any help would be appreciated. A member said the income and expenses should be prorated, and I agree. I will receive two Schedule K-1s—is it okay to enter two K-1s on Form 1040? Also, for California, should I attach the federal Form 1120-S even though the numbers differ from the CA Form 100-S and the Virginia return as well? What will happen? 2 assets moved VA ( furniture's) the other one as office 's qualified improvement remained in CA waiting to rent that office.