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It is important to understand that the K-1 reflects the S corporation's items of income, loss and deduction that are allocated to the shareholder for the year. The K-1 shows the amount of non-dividend distribution the shareholder receives; it does not state the taxable amount of a distribution. The taxable amount of a distribution is contingent on the shareholder's stock basis. It is not the corporation's responsibility to track a shareholder's stock and debt basis but rather it is the shareholder's responsibility.
In computing stock basis, the shareholder starts with their initial capital contribution to the S corporation or the initial cost of the stock they purchased (the same as a C corporation). That amount is then increased and/or decreased based on the flow-through amounts from the S corporation. An income item will increase stock basis while a loss, deduction, or distribution will decrease stock basis.
There is a special worksheet to track the basis - see page 3
So far - we need such worksheets for ALL tax years.
If we are talking about the cost of such task - we need to think about time required to collect all K1s and prepare all these worksheets.
I am not clear what exactly you meant under "the sale, and with no consideration" - it doesn't sound as teh sale - but if shares are transferred with no consideration - that is a gift.
Please clarify why do you classify that transfer as a sale.
When shareholders receive shares in exchange for contributing intangible assets that is not a "sale" - that is in exchange for contributing capital assets.The issue is that these capital assets have NO basis as they are self-created - so S-corporation will not amortize these assets and might not have them on books.But that is not a sale.On the other hand - because contributed assets have no basis in hands of the shareholder - the basis of shares received in exchange of such assets will also be zero.So that would be a starting point .The situation might be different if a new shareholder was an employee of said S-corporation and received shares as a compensation of services he/she provided to that S-corporation.In this case - we need to know the FMV of shares - which shoudl be reported as wages - and that value will become the basis..In any case - I will send you an offer - and will review all your calculations.I will provide by perdsonal email - so we may exchange information privately without posting on this public page.Please verify and accept.
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That is something I personally do not know.
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So far - I answering all your question as you posted them...
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