Legal Question in Tax Law in California

Board is threatening to issue a K-1 with profits without funds to pay those taxe
CA S-Corp with 3 Director/shareholders each owning 1/3 of the company. I am a Director who the other 2 kicked out of management and sold off large parts of the company ''secretely'', without informing me. They have basically destroyed the company and they have refused to show me the company's financials/documents. I have filed a petiton to make those documents available.

They have also threatened to issue a K-1 claiming profits on the sale of assets and will make me liable for taxes on my share of the company's profits. They will not provide me with any funds to pay taxes in connection with the K-1, while paying themselves salary and bounses to meet their tax burden.

If we do not settle before Dec 31 and I am in litigation with the other Directors, am I still liable to the IRS to pay those taxes immediately? Or is there any way I can file an extension/request/plea to defer those taxes until the case is settled? What recourse does a minority shareholder have in an S-Corp when a Board becomes Oppressive?

Thanks in advance!

Asked on 6/17/05, 5:39 pm

Donald Field Donald L. Field, Jr., Attorney at Law

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Re: Board is threatening to issue a K-1 with profits without funds to pay those

if you have not already brought an action against the corporation and other shareholders, you should do so immediately.

it may be possible to disregard or modify the amounts on any k-1 which is issued to you based on improper actions of the other directors.

SEE:

http://www.irs.gov/pub/irs-pdf/i8082.pdf

http://www.irs.gov/pub/irs-pdf/f8082.pdf

your tax return should be prepared by an experienced and knowledgeable cpa or enrolled agent.

Answered on 6/20/05, 8:26 am

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