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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29975
Experience:  Taxes, Immigration, Labor Relations
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I am ***** ***** and i have a question regarding how

Customer Question

hello, i am ***** ***** and i have a question regarding how to treat buyout in scorp
JA: Thanks. Can you give me any more details about your issue?
Customer: we have a s-corp with 3 partners, and at the beginning of 2015, one of the 5% partner wanted out so one partner use 10k to buy his share
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Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
There are two ways to buy our the shareholder - in both shares are purchased, but - shares might be purchased by other shareholders - with their out of pocket funds, OR - shares by be purchased by S-corporation.In either case - that purchase cost will be a basis for the buyer (capital investment) - and is NOT deducted as business expense. The selling shareholder will report the sale transaction on his tax return and will realize either capital gain or capital loss.
Customer: replied 1 year ago.
But how should I show that on the final K1 for the seller? No place on a Scorp k1 that I can show change in equity or distribution information.
Expert:  Lev replied 1 year ago.
On K1 we report income and some deductible items that S-corporation passes to shareholder.that purchase cost will be a basis for the buyer (capital investment) - and is NOT deducted as business expense.
Expert:  Lev replied 1 year ago.
That is NOT reported on K1.There is no change in equity.There is a change in percentage of the ownership - and that will be reported..I appreciate if you take a moment to rate the answer.Experts are ONLY credited when answers are rated positively.If you still have any doubts, need clarification - please be sure to ask.I am here to help you will all tax related issues.