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    A Stock Sale

    S Corporation owners are selling their corporation in a stock sale. On what tax document(s) is this event reported?

    #2
    Originally posted by Tax Sleuth View Post
    S Corporation owners are selling their corporation in a stock sale. On what tax document(s) is this event reported?
    Since there may be more info to this scenario, you may want to start by referencing TheTaxBook (TTB) tab 6-7 & 27-6

    From TTB tab 27-6 in general:
    "S corporation. When an S corporation sells assets, it does not pay tax on any gain realized through the sale. Instead, the gains of the corporation flow through to the shareholders. Sale of assets which generate a capital gain are passed on to the shareholders as a capital gain. Ordinary income is passed on to the shareholders as ordinary income. Gain recognized at the corporate level and passing through to the shareholders will increase the basis in the corporation for each shareholder. This reduces the gain on the liquidating distribution that will occur after the sale of assets."

    From TTB tab 6-7:
    Form 1099-B: Proceeds From Broker and Barter Exchange Transactions
    A taxpayer receives Form 1099-B from the following transactions.

    • Sale of stocks, bonds, commodities, regulated future contracts, foreign currency contracts, forward contracts, debt instruments, etc., for cash,
    • Receipt of cash, stock, or other property from a corporation that had its stock acquired in an acquisition of control or had a substantial change in capital structure, or
    • Exchange of property or services through a barter exchange.
    Cost or other basis reporting. Cost or other basis must be reported on Form 1099-B if the security is a covered security. A covered security includes the following:

    • Stock acquired for cash after 2010, except stock for which the average basis method is available.
    • Stock for which the average basis method is available (i.e. mutual funds) and acquired for cash after 2011.
    • A security transferred to an account if the broker receives a transfer statement reporting the security as a covered security.
    • Certain debt instruments or options acquired for cash after 2013.
    • A securities futures contract entered into after 2013.
    • A security acquired due to a stock dividend, stock split, reorganization, redemption, stock conversion, recapitalization, corporate division, or other similar action, if the basis of the acquired security is determined from the basis of a covered security.
    Noncovered security. A noncovered security is any security that is not a covered security.
    Last edited by TAXNJ; 07-10-2017, 11:03 AM.
    Always cite your source for support to defend your opinion

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      #3
      Schedule D

      TaxSleuth - your original post states the shareholder is selling is stock in an S corp to someone else. I believe you intend that the stock is being sold, and not the corporation's Assets, debt, or anything else.

      You report the proceeds on Schedule D. The "cost" to apply to this transaction is the taxpayer's basis in the stock. Basis has an ongoing calculation found in TTB, but at its simplest format is to add all contributions to profit, then subtract all losses and withdrawals (all elements are cumulative from date of ownership). If we are doing a good job for our S Corp clients, we will calculate his/her basis every year and disclose this to the shareholder (even minority shareholders).

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