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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 14031
Experience:  15years with H & R Block. Divisional leader, Instructor
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Selling shares of stock in S-corp. Subject to Long Term Capital

Customer Question

Selling shares of stock in S-corp. Subject to Long Term Capital Gains (held more than 3 years). Payment is by interest bearing promissory note over 5-year period. Is the Capital Gains calculated at the time the note is issued and due during the tax year the promissory note is issued?
Submitted: 7 years ago.
Category: Tax
Expert:  Robin D. replied 7 years ago.

HelloCustomer

Since a promissory note is held over time and not paid at time of sell then I advise the following:

 

If the purchase price is paid through the issuance of a

promissory note, the shareholders can generally report the

gain on an installment basis so long as:

seller is a cash based taxpayer

promissory note is not payable on demand

stock sold is not publicly traded

 

In an installment sale, selling shareholders report proportionate amount of gain as they collect portions of the purchase price.

 

So you will be showing your capital gains over the period of the note.

 

I hope this inofration is helpful,

Robin D. and other Tax Specialists are ready to help you
Customer: replied 7 years ago.
Definitely helpful. That covers it.
Expert:  Robin D. replied 7 years ago.
Good