How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Lev Your Own Question
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience:  Taxes, Immigration, Labor Relations
Type Your Tax Question Here...
Lev is online now
A new question is answered every 9 seconds

I am ***** ***** and i have a question regarding how

Customer Question

hello, i am ***** ***** and i have a question regarding how to treat buyout in scorp
JA: Thanks. Can you give me any more details about your issue?
Customer: we have a s-corp with 3 partners, and at the beginning of 2015, one of the 5% partner wanted out so one partner use 10k to buy his share
JA: OK got it. Last thing — Tax Professionals generally expect a deposit of about $32 to help with your type of question (you only pay if satisfied). Now I'm going to take you to a page to place a secure deposit with JustAnswer. Don't worry, this chat is saved. After that, we will finish helping you.
Submitted: 6 months ago.
Category: Tax
Expert:  Lev replied 6 months ago.
There are two ways to buy our the shareholder - in both shares are purchased, but - shares might be purchased by other shareholders - with their out of pocket funds, OR - shares by be purchased by S-corporation.In either case - that purchase cost will be a basis for the buyer (capital investment) - and is NOT deducted as business expense. The selling shareholder will report the sale transaction on his tax return and will realize either capital gain or capital loss.
Customer: replied 6 months ago.
But how should I show that on the final K1 for the seller? No place on a Scorp k1 that I can show change in equity or distribution information.
Expert:  Lev replied 6 months ago.
On K1 we report income and some deductible items that S-corporation passes to shareholder.that purchase cost will be a basis for the buyer (capital investment) - and is NOT deducted as business expense.
Expert:  Lev replied 6 months ago.
That is NOT reported on K1.There is no change in equity.There is a change in percentage of the ownership - and that will be reported..I appreciate if you take a moment to rate the answer.Experts are ONLY credited when answers are rated positively.If you still have any doubts, need clarification - please be sure to ask.I am here to help you will all tax related issues.

Related Tax Questions