Capital Gains and Losses

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We sold our business in September 2017. In our 2017 tax

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returns we have four stock...
We sold our business in September 2017. In our 2017 tax returns we have four stock holders in this S corporation. For 2017 the new owner owns a % and 3 of our family members are stockholders adding up to 100%. We are filing taxes for the corporation right now as well as personal taxes.
I have not been able to understand one last thing. We owe the new owner money because of employee benefits and deposits of clients attributed to us. He owes us $6,000 because work comp refunded $20,000. The new owner asked if we could apply this to the debt to him rather than him writing us a check. Is this a reasonable way to handle it?
Submitted: 3 months ago.Category: Capital Gains and Losses
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Answered in 35 minutes by:
3/30/2018
Tax Expert: PDtax, CPA firm owner replied 3 months ago
PDtax
PDtax, CPA firm owner
Category: Capital Gains and Losses
Satisfied Customers: 5,087
Experience: Tax professional and business consultant for 34 years
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Tax Expert: PDtax, CPA firm owner replied 3 months ago

It is a reasonable way to do things. It is essentially the same as making a loan payment.

Send him a copy of your loan statement showing the $6,000 reduction, and this should close the matter.

There might be tax issues, but they can be handled without the exchange of checks.

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Customer reply replied 3 months ago
The thing that confused me is that I believe the $6,000 is taxable. When you use the money as a loan payment, how is tax identified and does it end up being paid by all shareholders rather than the previous owners?
Tax Expert: PDtax, CPA firm owner replied 3 months ago
It is taxable to you if it reduced the gain you recognized when you sold. All of you. Treat it as $1500 additional sale proceeds for each of you received in 2018, with the same capital gain treatment as originally reported. No need to amend.The buyer can report $6,000 less in purchase price, which is reflected in the reduced loan balance.
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