Starting a corporation

[Vectorian Inc.]

I have a question about tax treatment of case when business starts as sole properitorship and becomes a corporation during same year.

I started the business (incurred first expenses) in January 2005; business was formally incorporated only in Jun 2005. I expect the business to start having revenues around December 2005/Janaury 2006 period; for now I only have expenses and I would like to report as many of them as I can on my personal tax return (so to reduce taxable income, and therefore amount of tax payable). I know that corporation can carry expenses/losses forward for next years, but right now it would be very favourable for me to report expenses on my personal form and greatly reduce the tax payable.

How are my expenses treated for tax purposes?! Are all my expenses (from January forward) to be reported on corporate tax form, or only those from the day of incorporation?

Thank you very much!

Vectorian Inc.

[Mark T Serbinski CA CPA]

If you have incurred the expenses through the corporation, you really have no choice. You cannot assign revenues or expenses based on the amount of tax you could save.

You will be able to use any loss incurred in the first year of the corporation in a future year once revenues ramp up.