I probably need to take this up with my accountant but here goes my hypothetical question.
Let's say I purchase a company for $1 million. I pay cash. That year it makes a $1 million dollar profit. At the very end of the year a freak occurance totally kills the ability of the company to make any money ever again. Revenues goes to zero, and profits go to zero. I have to shut down the company. Assuming this is my only financial activity what do my federal taxes look like? Is the whole think a giant wash with a $1M cash purchase, $1M in profit, and a $1M write off? By wash I mean no taxes, and I've got my $1M back.
What would have happened to my taxes (or what would my options be) if the freak occurance occured in the first day of the next fiscal year? This scenario would still have the $1M cash purchase, the $1M in profit, and no Rev or profit in year 2, but the write off would officially occur in fiscal year #2.
Let's say I purchase a company for $1 million. I pay cash. That year it makes a $1 million dollar profit. At the very end of the year a freak occurance totally kills the ability of the company to make any money ever again. Revenues goes to zero, and profits go to zero. I have to shut down the company. Assuming this is my only financial activity what do my federal taxes look like? Is the whole think a giant wash with a $1M cash purchase, $1M in profit, and a $1M write off? By wash I mean no taxes, and I've got my $1M back.
What would have happened to my taxes (or what would my options be) if the freak occurance occured in the first day of the next fiscal year? This scenario would still have the $1M cash purchase, the $1M in profit, and no Rev or profit in year 2, but the write off would officially occur in fiscal year #2.