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SALE OF PART OF S-CORP INTEREST


MOBEE

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Two shareholders in S-Corp.  Each one sold 10% of their interest to a third party... so going forward there will be 3 shareholders.   The two personal returns would show sale of stock (long term in this case) & corp would add new shareholder for the price paid for this interest in the S-corp - is that correct.  How about determining the basis of stock that was sold?  Thanks..

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They should have just issued new stock for the new shareholder. Then the existing shareholders wouldn't have a taxable event, plus it's cleaner and easier to do it that way.

If indeed the shareholders sold the stock they held, their basis is whatever it is on their stock basis worksheets. That has to be tracked every year. If it hasn't been tracked, you need to reconstruct it from the beginning.

The new shareholder has outside basis only, because they did not pay any money into the S corp.

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