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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 11608
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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A SHAREHOLDER SALES ALL HIS SHARES TO PARTNER SUB S CORPORATION,

Customer Question

A SHAREHOLDER SALES ALL HIS SHARES TO PARTNER SUB S CORPORATION, PER LEGAL CONTRACT, PARTNER PURCHASED SHARES, INVENTORY, DEBTS, EQUIP, ETC EVERYTHING, FOR THE ENTIRE TAX YEAR DOES THIS SELLING PARTNER RECEIVE A K1
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: ALSO THE PURCHASING PARTNER GAVE THE SELLING PARTNER A 1099 FOR THE BUY OUT. THE SELLING PARTNER STATES HE DOES NOT HAVE TO PAY TAXES ON THE BUYOUT. BASIS WAS NOT REQUESTED BY SELLING PARTNER.
JA: Is there anything else important you think the Accountant should know?
Customer: IN THE PAST MANY THEIR HAVE BEEN OTHER SALES WITH OTHER COMPANY'S AND YES THE SELLING PARTNER OF THE SUB S HAD TO PAY TAXES ON THE SELL OF THEIR PORTION OF THE BUSINESS
JA: OK. Got it. I'm sending you to a secure page on JustAnswer so you can place the $5 fully-refundable deposit now. While you're filling out that form, I'll tell the Accountant about your situation and then connect you two.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.
Hi,...The answer (the taxation part of the answer) depends on whether this was a stock sale or an asset sale....See this: http://www.alliedbizgroup.com/resources/publications/asset-sale-vs-stock-sale.html...For sellers, asset sales generate higher taxes because while intangible assets, such as goodwill, are taxed at capital gains rates, other "hard" assets can be subject to higher ordinary income tax rates...The way you've described this, it is likely a stock sale ... in a stock sale the buyer steps into the shoes of the seller, assuming all debt, assets, etc ... basis on the assets for depreciation doesn't change, liabilities of the S-Corp remain the same ... the buyer now just owns all of it....What you may be missing here is that the only effect this has on the K-1 for the seller is that his final K-1 (be sure to mark the final box) represents his/her share of profits/losses and other K-1 items for the period of time up TO the sale date....BUT, this is a private matter between the buyer and the seller... this does not affect the BOOKS of the S-Corp at all. YOu simply need now to make the change in the company's stock ledger to show the buyer now owning all shares....The 1099 is COMPLETELY inappropriate. and the seller will report this as a capital gain or loss on their personal return depending on that individual's basis on the S-Corp stock.
Expert:  Lane replied 1 year ago.
I hope this has helped....Please let me know if you have any questions at all....If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the faces or stars on your screen, and then clicking “submit")...JustAnswer will not credit me for the time and work until you have rated in this way....Thank you!Lane……I hold a law degree (JD, Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP® and CRPS designations. - I’ve been providing financial, Social Security/Medicare, estate, corporate, both for-profit and non-profit, and tax advice, since 1986.
Expert:  Lane replied 1 year ago.
Did you see my answer?