Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

This answer was rated:

My niece owns 50% in an S-corp that has losses just about…

Pearl, my niece owns...

Pearl, my niece owns 50% in an S-corp that has losses just about every year and cumulatively significant. These losses were effectively funded by borrowing money. The loan is six figures. Now the other 50% shareholder wants to keep the company and have the company exercise a stock redemption for the 50% of the company my niece owns for $100. The amount my niece effectively paid for her shares. . My question is would my niece have to pay taxes on the difference of her $100 and the 50% of negative retained earnings? Hopefully my question is clear. Thanks.

Accountant's Assistant: The Accountant will know how to help. Is there anything else important you think the Accountant should know?

My niece did not personally guaranty the loan the corporations took out to fund operations. She was an employee of the company and received a salary that was effectively shielded from taxes by virtue of the k-1 losses allocated to her each year.

Show More
Show Less
Ask Your Own Tax Question
Answered in 21 minutes by:
3/8/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,668
Experience: Taxes, Immigration, Labor Relations
Verified

When your niece sells her shares in S-corporation -

she will simply report the sale transaction on form 8949 as

$100 (sale price) MINUS (adjusted basis)

Her basis in S-corporation share is her original contribution - that was $100

Then - the basis is adjusted every year based on K1 reporting

see worksheet in instructions

https://www.irs.gov/pub/irs-pdf/i1120ssk.pdf

page 4

Worksheet for Figuring a Shareholder’s Stock and Debt Basis

.But her stock basis will never be less than a zero

Thus - we will calculate her gain or loss - and it will not be more than her original $100.

Losses that S-corporation realized and all corporate debts will NOT affect your niece as a shareholder.

Let me know if you need any clarification or help with reporting.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,668
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
Was this answer helpful?
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,668
32,668 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,338 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,451 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

56 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,124 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

< Previous | Next >

Related Tax Questions
It is in regards to accounting... what is a transaction
it is in regards ***** ***** what is a transaction report? is for expenses that get reported each year to an accounting firm for tax reconciliation and filing business taxes... … read more
ABC Accounting Group
ABC Accounting Group
Bachelor\u0027s Degree
824 satisfied customers
On which line on the Michigan state form do I report 1099R
on which line on the Michigan state form do I report 1099R state tax withheld? … read more
Bill
Bill
Master\u0027s Degree
3,126 satisfied customers
What irs form and publication do you use for reporting sale
what irs form and publication do you use for reporting sale of land parcel with improvements, such as retainer wall, road, and other required improvements. (Not vacant with no improvements). … read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,906 satisfied customers
Do I report form 1099- if box 7 says loss not allowed. No it
do I report form 1099-b if box 7 says loss not allowed … read more
Lev
Lev
Tax Advisor
32,668 satisfied customers
What IRS form being used for reporting employee wage
what IRS form being used for reporting employee wage quarterly beside form 941 (employer tax return)? is there a link to download that form from IRS website?… read more
Lev
Lev
Tax Advisor
32,668 satisfied customers
Are beneficiaries required to report K-1 credits on the Form
Are beneficiaries required to report K-1 credits on the Form 1040, or is at our discretion? I'm using TAXACT software. The Form 1041 K-1 Final Year Deductions only shows credits on Line 11 A and C. Th… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
What is the tax treatment for a real estate transaction made
Hi,What is the tax treatment for a real estate transaction made up of 2 contracts for raw land that is owned free and clear?One option to purchase agreement One lease agreement (84 monthly payments)Th… read more
Lev
Lev
Tax Advisor
32,668 satisfied customers
Should a missed RMD be reported on the tax form of the year
Should a missed RMD be reported on the tax form of the year it should have been taa should a missed RMD be reported in the tax year it should have been taken … read more
Lev
Lev
Tax Advisor
32,668 satisfied customers
For an S Corp, if the shareholder distribution is in excess
Hi Carter,For an S Corp, if the shareholder distribution is in excess of the shareholder's stock basis, this is treated as gain from the sale or exchange of the underlying stock; however, can you tell… read more
Carter McBride
Carter McBride
LLM
957 satisfied customers
I have a question about report stock option transaction. If
Hello, I have a question about report stock option transaction. If I sell a put option in Dec of 2017 with the expiration date in 2018. I have a sales proceeds in 2017 but do not know whether there wi… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
2,048 satisfied customers
Regarding Form 6198 for 1040, single S Corp Shareholder:
Regarding Form 6198 for 1040, single S Corp Shareholder: Taxpayer is single shareholder in S Corp. S Corp had net loss. Taxpayer's basis at beginning of year was $1,000 comprised of capital stock. No … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I have prepared the Form 8949 reporting the sale of a
I have prepared the Form 8949 reporting the sale of a estate's fractional interest in a house, the other fractional owners are the residual beneficiaries. Sales proceeds minus the (stepped up basis pl… read more
Lev
Lev
Tax Advisor
32,668 satisfied customers
I am preparing the form 8949, to report the estate's
I am preparing the form 8949, to report the estate's fractional share of a real estate sale. I have some questions regarding the preparation of the form.1. Part ii, 1(b) asks for the date acquired - i… read more
Lev
Lev
Tax Advisor
32,668 satisfied customers
TAX: Taxpayer received form 1099-Misc with income reported
TAX: Taxpayer received form 1099-Misc with income reported in box 7 (non-employee compensation) of $4189. The taxpayer performed services as a Substitute Teacher. Is this income reported on SCH C and … read more
Carter McBride
Carter McBride
LLM
957 satisfied customers
Would like to know how to report taxes on payroll forms, W2,
Hi, Would like to know how to report taxes on payroll forms, W2, W3 and 941 for an employee who received sick pay from a 3rd party. I can provide you with all the info needed to properly fill out the … read more
Dr. Fiona Chen
Dr. Fiona Chen
President
Ph.D.
916 satisfied customers
2% shareholder insurance - If a 100% Shareholder is on
2% shareholder insurance - If a 100% Shareholder is on payroll and he has an insurance policy but spouse is on Medicare, is the amount of the insurance premiums of owner plus the Medicare that was wit… read more
Carter McBride
Carter McBride
LLM
957 satisfied customers
Form 8300. We are doing a business to business transaction.
We are doing a business to business transaction. The form is not clear on how to compete. Do we complete Part I f … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Where do you report loans to and from shareholders on the
Where do you report loans to and from shareholders on the tax return for a business (C-Corp)? Where on the tax return do you report interest on a corporate loan to shareholders?… read more
abci168
abci168
Principal
27 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x