How would I make an entry for the following:
S Corp stock purchased for $150,000(at date of purchase, stock listed as $50,000 liability)
$50,000 paid to selling stockholder from purchaser
$100,000 to be paid to selling stockholder by note
Preparing 1120S data
Working on corporation tax return
Person A sells all of the 100 shares of ABC Corp to Person B for $150,000
Person B pays Person A $50,000
The remaining $100,000 is owed to Person A by a 3-year note secured by stock certificate and a security agreement with debtors, Person B and ABC Corp
I guess my questions are: would I list the note on the corporation balance sheet or is it just Person B's debt and how would I handle note payments from ABC Corp on behalf of Person B?
"Preparing 1120S data"
Then you have nothing to enter for this sale that is between two private parties.
"and how would I handle note payments from ABC Corp on behalf of Person B?"
The corporation doesn't make these payments. The corporation would have Distributions to the shareholder, and the shareholder will do with the funds whatever that shareholder needs or wants to do with the funds. And that assumes this would be after Reasonable Payroll has been paid out for that shareholder, for services performed for the business, of course.
This new shareholder can have pledged the ownership of the corporation for security purposes, but that isn't the taking of a loan from the corporation and the corporation didn't just buy itself out of the prior ownership.
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