S Corporation Stock & Asset Sale

Forum|Forum|5 years ago
November 23, 2020
2 replies
44 views

Hi All,

Need some guidance on the following situation. Client selling S Corporation with the following details:

1) Selling FF&E and building as an asset sale

2) Selling corporate shares as a stock sale

I currently used the depreciation screens to report the building and FF&E sale which will show up on the K-1.

My question is how to report the sale of the s corp shares. Is that performed on schedule D of the 1040 or on the 1120S? How do you factor in the shareholder basis for the sale? Do you simply report the sale of the shares on SCH D and use the stock basis and loan basis as your cost basis? Or is there a way to show the sale on the K-1 screen on the 1040? Mostly concerned that the client may lose benefit of their basis by reporting this incorrectly in Lacerte.

Lacerte Tax

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sjrcpa

Level 15

The sale of the shares is reportable by the shareholder on their 1040, Schedule D/Form 8949 ~~9049~~, using their stock basis after all S Corp transactions including the asset sale and distributions.

What is happening to the loan in this transaction?

The more I know the more I don’t know.

qbteachmt

Level 15

"using their stock basis after all S Corp transactions"

Did the S corp really also own the Building? Was the loan the Mortgage? The sale of the hard assets affects the value of the S corp's stock.

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rbynaker

Level 13

That's an odd arrangement, I'm not even sure where to start! Are the assets being sold to a different buyer than the stock?

Before you approach the tax return you need to figure out the bookkeeping. Just take it one transaction at a time.

S Corp sells the assets so Cash increases, Fixed Assets decrease and there's a Gain/Loss. S Corp owner sells shares, this happens outside the corporation so nothing to book there directly (but it will impact the K-1 allocations). You mentioned loan basis but first we need to know what happened to the note payable between corporation and the selling shareholder.

Sounds like a mess.

Edit: Sorry, started typing before there were any replies and then got sidetracked!

qbteachmt

Level 15

"Edit: Sorry, started typing before there were any replies and then got sidetracked!"

I do that, too; open the tab, but don't update it right away.

"what happened to the note payable between corporation and the selling shareholder."

Oh, good mind-reading attempt. Once again, more details sure would be helpful and perspective makes all the difference.

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