Someone owns a US-based software company (1120) C-Corp with sales in the US. As it turns out the US-based company fully owns a subsidiary in another country (equivalent to 1120 in the US, its called Private Limited). The function of the Foreign-Sub-Comp is to support the US-Based Comp and operate as a call center, software maintenance, IT/Tech support, etc.
The Foreign-Sub-Comp doesn't sell anything and their only revenue consists of large transfers from the US-Based Comp (parent comp) to the Foreign-Sub-Comp. The Foreign-Sub-Comp keeps it's own books in their local language and currency which I haven't seen. Last year these payments were much smaller and were categorized as contractor exp on the tax return. This year the payments to the Foreign-Sub-Comp are close to $900k which is significant and they fully own the Foreign-Sub-Comp... Previous tax return didn't specify that the US-Based Comp owns a Foreign-Sub-Comp nor was anything recorded in QBO that they own another company.
Their taxes are due Oct 15th!
How do I tackle this? lol
How do I categorize those payments to the Foreign-Sub-Comp?
Should we record the Foreign-Sub-Comp into the US-Based Comp books as an other long-term asset?
Note they didn't buy the Foreign-Sub-Comp they started it with the transferred funds.
Should the current tax return 1120 reflect the fact that they own a Foreign-Sub-Comp, even though it was started in 2018 but not recognized on prev tax return.
Would we need to consolidate the financial statements to file the tax return? or do we only file the US-Based financials on the tax return?
Or do we expense the entire amount to contractors exp account just like in previous years?
The Foreign-Sub-Comp doesn't generate a profit (theoretically)
