Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
Level 2
posted Jan 19, 2021 12:22:13 PM

Form 1120, Schedule K, question 7 (startup tax question)

On form 1120, Schedule K, question 7 says "At any time during the tax year, did one foreign person own, directly or indirectly, at least 25% of the total voting power of all classes of the corporation’s stock entitled to vote or at least 25% of the total value of all classes of the corporation’s stock?"

 

Would the above apply if no shares have been issued (shares were only authorized at incorporation)? In other words, can authorized shares be considered "stock entitled to vote" and what exactly does "all classes of the corporation's stock" mean --> would that include authorized shares, thereby requiring me to add the foreign individual?

0 6 1176
6 Replies
Level 12
Jan 19, 2021 12:29:41 PM

NO ONE OWNS authorized but unissued shares.

Level 2
Jan 19, 2021 12:34:57 PM

Perfect, that certainly does seem intuitive. Thanks for your prompt reply.

Level 2
Jan 19, 2021 12:52:32 PM

One more question: I assume then, that the answer to the question (Form 1120, Schedule K, question 10) "Enter the number of shareholders at the end of the tax year (if 100 or fewer)" is zero given no shares have been issued (only authorized), even though there are 3 founders/directors/officers?

Level 12
Jan 19, 2021 1:00:05 PM

That's right if no one owns any shares.

Level 2
Jan 19, 2021 9:35:07 PM

thanks for your help

Expert Alumni
Jan 23, 2021 11:08:53 AM

That is correct, if there are no issued shares, there are no shareholders. Therefore, Line 10 for Schedule K of the Form 1120 should be zero.