S corp sale

[imjulier]

I have an s-corp that one shareholder bought out the other back in Feb 2011. I did the accounting for through the sale date and know the amount of income/loss to report to each. It appears that there is no easy way to do this or I am thinking about it wrong since the K-1 schedule only offers special allocations for basis items....not income/loss? What is the best way to treat this in ATX?

Thanks for any insight.

Julie

[TaxCPANY]

Basically, imjulier, the entity recognizes no gain/loss on a "complete redemption" of a shareholder's interest; so it's not reportable on Schedule K-1 except to report that year-end ownership is 0%. (I think IRC Sec. 302 governs it; but, tonight, I can't access Intelliconnect to perfect the cite.) Anyway, gain/loss is a matter 'only' of the redeeming shareholder, to report on his/her own Schedule D. N.B. the event is date-specific, not year-end as with a partnership; you should calculate the shareholder's basis as of the date he/she redeemed.

BUT, the entity does needs to adjust its AAA, in respect of the redemption -- and report that on its returns. Sorry (again), but I've got to tackle some 'technical problems' in advance of answering your question in full.

Hope I've helped at least summuch. TaxCPANY

[imjulier]

Thanks TaxCPANY-

Your answer is what I thought but am just trying to figure out how to execute it in ATX. I know my figures for allocations to each (of income through the sale date), basis as of date of sale, etc but just can't see how to report in ATX other than to over-ride the K-1 and basis amounts. Any one?

Thanks again,

Julie

[Margaret CPA in OH]

I looked back at one I did in 2006 and, like you, I knew what the end result should be. I did input the percentage as a back calculation but see that I did have to override on the detail tab for some specific items decided by the shareholders in their agreement. I think that sometimes even the best software cannot accommodate the real world because people don't always do things in life and business exactly as they should according to rules and regs. I think it's more important to report what happened than try to fit square pegs into round holes. Sometimes we do after the fact stuff.

Hopefully TaxCPANY or someone else will be able to offer the precise input for you to have a perfect outcome.

[TaxCPANY]

Go to the [boldface'] Percentage of Stock section of the Input tab of the "Sch K-1" tab of the Shareholder's Input Sheet, imjluier; use the Period 1 input to describe the selling shareholder's % of holding shares (from 1/1/2011 to x) & the Period 2 row to input post-sale (from x to 12/31/2011) -- as zeroed-out. Use that PoS section in the remaining shareholder's Input tab -- the other guy -- to report his/her accession to 100% ownership -- matching those dates of transition. Everything you need to report is done within the Input tabs of each Shareholder's Input Sheet. (You should not need to over-ride *anything,* overall.)

Caveat: you might need to fine-tune/tweak the dates of transition -- e.g., maybe 2/2/2011 is the date of redemption, and 2/3/2011 is the date of accession, instead of both being the same date . . . ? Also, delve into the Detail tab of the Sch K-1 tab, to ensure that, overall, you're reporting *only* 100.00% of the transaction and not anything more or less.

It's a gnarly job; but, believe me, ATX can nail it -- just as well and with the same 'sweat' as required by Lacerte & ProFX & c., in my experience.

Good luck, TaxCPANY