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: 25 days 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 25 days ago
PDtax
PDtax, CPA firm owner
Category: Capital Gains and Losses
Satisfied Customers: 5,011
Experience: Tax professional and business consultant for 34 years
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Tax Expert: PDtax, CPA firm owner replied 25 days 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.

Thanks for asking at Just Answer. Positive feedback, five stars being best, ***** ***** I'mCustomer

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Customer reply replied 25 days 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 25 days 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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PDtax, CPA firm owner
Category: Capital Gains and Losses
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