Hello and thank you for allowing us at Just Answer to assist you. To maintain S-Corp status, all distributions need to be equal among stock ownership. Because of this, I would recommend the S-Corp redeem the shareholder's stock by paying him with the $500,000 real estate. There may be adjustments depending on the shareholders' bases, but this appears to be the simplest solution. Thanks, Bill
Specifically, how would this be accomplished? i.e.--how would the s-corp redeem the shareholder's stock by paying him with the $500,000 real estate?
The Company would simply transfer title of the property to him. On the books, his shares would be debited and the property would be credited. But, I would consult your attorney to make sure everything is handled properly.