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Stephen G.
Stephen G., Sr Income Tax Expert
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I sold my interest in an S-Corp for $150,000 ($150 per share

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I sold my interest in an S-Corp for $150,000 ($150 per share for 1,000 shares) on 1/1/10. The new owner of the S-Corp took over all debts (except for the final year's tax liability, which will come out of my $150,000). The new owner is also retaining all of the assets of the company. How do I report this sale on my tax return? I understand that I will receive a final K-1 for that 1st day of 2010, and will report that accordingly. It's the actual sale that I am unsure of.
Submitted: 4 years ago.
Category: Tax
Expert:  Stephen G. replied 4 years ago.

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.

 

Since you sold the S-Corp stock the sale belongs on Schedule D as a long-term capital gain (assuming you held the stock for at least a year).

 

The selling price of $150,000. is your gross proceeds and you look to your own records or the K-1 to determine your adjusted tax basis in the S-Corp stock. Your accountant (for the S-Corp) should be able to assist you with determining your adjusted basis.

 

The final tax liability will not reduce the $150,000., selling price anymore than any other taxes that you paid along the way.

Customer: replied 4 years ago.

Thank you for getting back to me so quickly. Is the basis adjusted by Retained earnings, contributions, draws and non-deductible items? I want to have an understanding of how an accountant would calculate the adjusted basis.

 

Also - for bookkeeping purposes, how do I make an entry for the sale to reflect a clean set of books moving forward for the new owner?

 

Thanks again -I really appreciate your time.

Expert:  Stephen G. replied 4 years ago.

 

Sorry, but that is way beyond the scope of your original question & would be impossible to answer that question without having your tax returns, acccounting/bookkeeping history etc., I mean we did go to school for this stuff....... :)-

 

In theory, if everything has been accounted for properly along the way, the books of the S-Corp are not affected by a sale of stock from an existing shareholder to a new shareholder any more than any other company's books are adjusted for sales of stock on the open market..........

 

You're going to need an accountant familar with S-Corp accounting to sort this all out for you; who is doing (has done) the s-corp returns? That's where to go for your answers; he/she will have the records & know how to use them..........

 

Please remember to click on the green "ACCEPT" "ICON" & thanks again for using our service.

Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4182
Experience: Extensive Experience with Tax, Financial & Estate Issues
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Stephen G.
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