Queskr Inc. -- 2025 Tax Year Review & Risk Assessment

A1. Shareholder Loan Maturity -- Imputed Income Risk

Most of the 56 promissory notes have 5-year maturities, meaning the majority matured between 2021-2027. As of 2025, roughly 54 of 56 notes are past due or approaching maturity. The loan assignment to Etsion Brands on June 21, 2025 transferred the creditor position but did not formally extend or restructure the maturity dates.

Risk: The IRS may view unpaid, past-maturity loans from a controlled foreign shareholder as constructive distributions (treated as dividends), especially for a company that has never generated revenue. If treated as distributions:

Potential reclassification of some or all of the $171,900 as deemed dividends
U.S. withholding tax obligations (treaty rate between U.S. and Israel applies)
Form 5472 reporting adjustments

Question for CPA: Has Mike been treating the loans as genuine debt on each year's 1120? Is there a risk the IRS views 10 years of no revenue + no repayment as evidence the loans are equity contributions? Should we formalize an extension or restructuring agreement to preserve debt characterization?

A2. Loan Assignment -- Transfer Pricing & Characterization

The June 2025 assignment transferred $171,900 in shareholder debt from Yohay Etsion (individual) to Etsion Brands Ltd (Israeli company Yohay controls). This is a related-party transaction between commonly controlled entities.

Risk:

Was the assignment at arm's length? The deed transferred at face value ($171,900). No discount for time value, credit risk, or the fact that most notes are past maturity. An arm's-length buyer would likely discount heavily for a demand loan from a zero-revenue entity.
The IRS could argue the true FMV of the debt is less than $171,900, with the difference being a deemed contribution or gift between related parties.
Israeli tax implications: Does Etsion Brands need to report anything on the Israeli side for receiving this receivable?

Question for CPA: Does the assignment need a transfer pricing analysis or contemporaneous documentation? Even if the amounts are small, the IRS scrutinizes related-party cross-border transactions on Form 5472.

A3. Form 5472 -- New Related Party Added

2025 is the first year Etsion Brands Ltd appears as a related party. Prior filings only listed Yohay Etsion personally.

Checklist for CPA:

☐ Etsion Brands Ltd must be reported as a new 25% foreign-related party (or "related to a 25% foreign owner")
☐ Loan assignment reported as a reportable transaction (balance transfer between related parties)
☐ Agency Agreement reported (even though $0 transacted -- the existence of the agreement is reportable)
☐ Beginning-of-year loan holder (Yohay Etsion) vs end-of-year holder (Etsion Brands Ltd) -- both need disclosure
☐ Full legal name, country, address, and Israeli company number (517176301) for Etsion Brands

Penalty risk: Form 5472 penalties are $25,000 per form per year for incomplete or inaccurate filing. Getting this transition year right is critical.

A4. Entity Purpose & "Economic Substance"

Queskr has now existed for 10 years with zero revenue. The entity was reactivated mid-2025 with the agency agreement, but no actual economic activity resulted.

Risk: The IRS may question whether Queskr has sufficient economic substance or business purpose, particularly in light of:

$170,699 in accumulated NOLs
Zero revenue over the entire life of the entity
$171,900 in shareholder loans never repaid
An agency agreement that produced no activity

This matters less while there is no income, but becomes critical the moment Queskr starts earning the 2.75% agency fee. The IRS could challenge NOL utilization if they view the entity as lacking substance.

Question for CPA: Is there anything we should proactively document to establish economic substance? Would a brief memo to file describing the business purpose evolution (from original concept to collection agent) be protective?

B. Items That Might Be Missed

B1. Accrued Interest on Shareholder Loans

The 56 promissory notes carry 1% annual interest. Even though no interest payments were made (cash basis), the question is whether accrued interest needs to be disclosed or tracked.

On a cash basis, Queskr wouldn't deduct unpaid interest. But the creditor (first Yohay, then Etsion Brands) may have imputed interest income obligations under their home jurisdiction (Israel).
For 5472 purposes, the IRS may want to see the interest calculation reported even if not paid.

Question for CPA: Have prior filings included accrued interest in the loan balance on Form 5472, or only principal? The current $171,900 appears to be principal only. If interest has been accruing at 1% since 2016, the total obligation is higher.

B2. Wise Account Activity

The June 2025 bank statement shows a $31.00 payment to Wise Inc (June 23) and a $31.00 refund from Wise (June 30). The tax summary correctly nets this to $0.

But: Does Queskr have a Wise Business account? If so:

Is there a separate Wise account balance that needs to be reported?
Does the Wise account create FBAR obligations? (Wise accounts may be held at foreign banks)
The Agency Agreement mentions a "segregated sub-account" for trust funds -- is this the Wise account?

Question for CPA: Do we need to disclose the Wise account on FBAR (FinCEN 114) or Form 1120 Schedule L? Even if the balance is near zero, the existence of the account matters.

B3. Delaware Franchise Tax -- 2025 Payment

The tax summary mentions confirming 2025 payment status with Harvard Business Services. This is due by March 1, 2026.

Action item: Confirm with HBS that the 2025 franchise tax has been paid or is scheduled. The 2024 payment was $539. Failure to pay results in a $200 penalty + 1.5%/month interest, and Delaware can void the entity's good standing.

B4. FinCEN BOI -- Filing Status

The Corporate Transparency Act requires Beneficial Ownership Information reporting. For an entity created before January 1, 2024, the initial report was due by January 1, 2025.

Question for CPA: Has the BOI report been filed? If the June 2025 loan assignment changed the beneficial ownership structure (Etsion Brands now has economic interest as creditor), does an updated BOI report need to be filed?

B5. Shopify Test Transactions -- Documentation

The two Shopify deposits ($19.27 + $4.47 = $23.74) classified as owner test transactions need supporting documentation to defend the non-revenue classification.

Suggestion: Keep a written memo noting:

These were test transactions by Yohay Etsion (owner) to verify Shopify integration
No actual customer placed orders
The test orders were for platform setup purposes related to the Agency Agreement
Refund/cancellation records from Shopify if available

Without documentation, an examiner might treat these as revenue (small amount, but principle matters).

B6. Google Cloud Charge -- Payment Method

The $0.13/month Google Cloud charge is billed to a card ending in 8265. Confirm this is a Queskr corporate card or the owner's personal card.

If personal card: Is this being treated as a shareholder contribution or reimbursable expense?
For consistency, all company expenses should flow through the company bank account or be properly documented as shareholder advances.

C. Questions to Ask the CPA

Filing & Compliance

Form 5472: How should we report the mid-year loan assignment? Two separate 5472s (one for Yohay, one for Etsion Brands)?

Accrued interest: Should we be tracking and reporting accrued 1% interest on the promissory notes?

BOI report: What's the filing status? Any update needed for the new Etsion Brands relationship?

Delaware franchise tax: Confirmed paid for 2025?

Loan & Related Party

Debt vs. equity risk: Are you comfortable the $171,900 is still defensible as debt given 10 years of no revenue and no repayments? What would strengthen this position?

Loan assignment documentation: Is the assignment deed sufficient, or should we prepare a transfer pricing memo?

Interest imputation: Under IRC Section 7872, is there a below-market loan issue with the 1% rate?

Entity Strategy

NOL preservation: Are there any Section 382-type ownership change limitations to worry about? (The loan assignment itself shouldn't trigger one, but worth confirming.)

Economic substance: What's the minimum level of activity needed to defend the NOLs when Queskr starts earning revenue?

Roie Mandler: He holds 25% of shares. Is he included on any filings? Does the CPA need information about him?

D. Strategic Considerations Going Forward

D1. The NOL Asset

The $170,699 NOL is Queskr's most valuable asset. At a 21% federal rate, the potential tax shield is approximately $35,847. The indefinite-carry portion ($160,859 post-2017) has no expiration but is limited to 80% of taxable income per year. The 2016-2017 portion ($9,840) expires in 2036-2037.

Key point: The NOL only has value if Queskr generates taxable income. At 2.75% of gross collections, the entity needs real transaction volume. The NOL itself is an argument FOR keeping the entity alive, but also invites scrutiny.

D2. Section 269 -- Acquisitions to Evade Tax

If the IRS views the entire structure (dormant entity + massive NOL + new agency agreement) as primarily tax-motivated, they could challenge NOL usage under IRC Section 269 ("Acquisitions Made to Evade or Avoid Income Tax"). The counter-argument is that Queskr has always been owned by Yohay, there was no acquisition, and the business purpose evolved naturally. Having the CPA document this narrative in the filing workpapers would be protective.

D3. Timing of First Real Revenue

When actual customer transactions begin flowing through Queskr, the compliance burden increases significantly:

Trust accounting for agent-held funds
Monthly closing procedures per the Proposed Procedure 1.2
More complex 1120 with actual revenue, COGS-equivalent (trust remittances), and intercompany transactions
Sales tax nexus analysis (collecting payments could create nexus in customer states)

Recommendation: Before the first real transaction, have a brief call with Mike Pine to walk through the full procedure and ensure QuickBooks or equivalent is set up properly.

D4. The Minority Shareholder

Roie Mandler holds 25% (1,395,000 shares). The complete reference notes a discrepancy between 75% ownership at issuance and 98.5% voting stock on tax filings. This needs clarity:

Were shares transferred? If so, were those transactions reported?
Does Mandler still hold shares? If yes, he has rights as a minority shareholder.
The shareholder loan was made by Yohay and assigned to Yohay's company -- this effectively gives Yohay/Etsion Brands a senior claim over any distributions, potentially to Mandler's detriment.
Any future distributions or liquidation would need to account for Mandler's 25%.

Question for CPA: What does the 98.5% voting figure on the 5472 represent? Is there a dual-class structure or restricted stock agreement that explains the discrepancy?

E. Summary Priority Matrix

Item	Priority	Type	Action
Form 5472 -- Etsion Brands as new related party	HIGH	Compliance	Ensure complete disclosure
Loan maturity/debt vs equity risk	HIGH	Risk	Discuss with CPA; consider restructuring
Accrued interest tracking	MEDIUM	Compliance	Clarify with CPA
Wise account FBAR implications	MEDIUM	Compliance	Confirm account status
Shopify test transaction documentation	MEDIUM	Documentation	Create memo to file
BOI report status	MEDIUM	Compliance	Confirm with CPA
Delaware franchise tax 2025	MEDIUM	Action item	Confirm paid by March 1
Minority shareholder discrepancy	LOW (for 2025)	Strategic	Clarify with CPA
Economic substance memo	LOW (for now)	Strategic	Consider before first revenue
Section 269 narrative	LOW (for now)	Strategic	Document before NOL utilization

This is a strategic review framework, not tax advice. All items should be discussed with Mike Pine (CPA) for jurisdictional and regulatory specifics. Israeli tax implications of the Etsion Brands side should be discussed with Israeli tax counsel.