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USTaxAdvising
USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1237
Experience:  US Taxation specialist.
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On of the 4 shareholders decided do sell his shares. By the

Customer Question

on of the 4 shareholders decided do sell his shares. By the way there are 15 entities engaging in transportation business, owed by 4 shareholders. One of the shareholders decided to sell all of its shares. They set one price, how we should report the sale of the shares. Cause there are 15 returns. Are other shareholders allowed to by the shares, o the entity itself buys it. All entities are s corps. If the remaining shareholders buys exiting shareholders what is proper way to report it on a tax return, and wise versa what if the S corp Buys the shares, Which way is more beneficial to either party .
Submitted: 6 months ago.
Category: Tax
Expert:  USTaxAdvising replied 6 months ago.
Hello,I can help you with your tax questions today. In order to do so I need to know whether or not the respective company is buying back the shares or are the existing shareholders buying back the shares from the seller?
Customer: replied 6 months ago.
Thats what they want to figure out. Which way is most beneficial for seller, for the company and for the remaining shareholders. Can you give me to scenarios please,One when the remaining shareholders are buying out all the shares andAnother when the company is buying back those shares.What would be tax consequences for either party.Thank You
Customer: replied 6 months ago.
Just curious when I can expect the answer?
Expert:  USTaxAdvising replied 6 months ago.
Hello,Sorry for the delay, I have been out of internet contact for the day.It really doesn't matter to the seller as he/she will receive the fair value or acceptable fair value to him/her. The existing shareholders would most likely prefer to buy the shares back if they had the cash to do so. If not then the company would buy back the shares. I can't comment on what would be more beneficial but I can answer your original questions, please find my comments below.They set one price, how we should report the sale of the shares. - If the shares were purchased by the company then the total equity of the company would go down by the amount of outstanding equity for the selling shareholder. If the equity outstanding was less than the cash received then a capital gain would be recognized by the company (vice versa for a capital loss). If the shares were purchased by existing shareholders then the selling shareholders equity would merely be transferred, pro-rata, to the remaining shareholders buying the equity.Cause there are 15 returns. Are other shareholders allowed to by the shares, o the entity itself buys it. - Yes other shareholders can purchase the shares. If the remaining shareholders buys exiting shareholders what is proper way to report it on a tax return, and wise versa what if the S corp Buys the shares, - only thing that gets's recorded is the share transfers and increase in equity for remaining shareholders and decrease in equity for selling shareholder. I hope that helps provide some clarity that you were looking for. Generally it is better to keep the share purchase outside of the company and made by existing shareholders. No gain or loss would be recorded by remaining shareholders in this event. Best regards,