Level 3

Client sold his S-corp shares to ESOP in a private note

Forum|Forum|4 years ago
April 12, 2022
1 reply
4 views

The notes summary for the S-corporation shares sold to an ESOP reflects payments not only for redemption of his shares, but also AAA and PPP. Do they all get added together for this year's payments on the stock sale as an installment sale since he is holding the note? Or should the AAA and PPP amounts be presented separately?

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sjrcpa

Level 15

Report the sale as you would any other sale of stock.

Not sure why AAA was even mentioned in the K-1 notes.

PPP is tax exempt income. It, and all other K-1 items of income, loss, deductions, and distribution, affect the shareholder's basis in the stock.

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

M

margowalkercpaAuthor

Level 3

Thank you so much for your response. Is there something else I should be doing with the PPP funds paid out of the ESOP? Previously the tax exempt PPP funds were reported on the Schedule K-1. Since the employee is no longer a shareholder of the company, there is no K-1 for 2021. Isn't the PPP funds only tax exempt when paid out of the S-corp?

sjrcpa

Level 15

I thought you were looking at a 2021 K-1 . I have no idea what the context for those notes is nor what to do with them.

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

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