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).