Sched D or Form 4797

[Pmac]

My client is a 40% shareholder in a multi-member LLC which is taxed as an S-Corp by election. The 60% shareholder wants to buy out my client's share entirely. The IRS says such a transaction should be reported on Schedule D, not Form 4797. The shareholders have owned the property, which is a Trailer Park, for about 10 years. The LLC owns Goodwill, land, Utility hookups and some minor improvements. The original purchase was for land and goodwill. This appears to be a Sec 1231 transaction with no losses, only gains. Question: Does party being bought out have depreciation and amortization recapture to deal with in this transaction or, assuming Sec 1231, does it have only a capital gain of the difference between selling price and basis?

[veritas]

My reading comprehension

My client is a 40% shareholder in a multi-member LLC which is taxed as an S-Corp by election. The 60% shareholder wants to buy out my client's share entirely. The IRS says such a transaction should be reported on Schedule D, not Form 4797. The shareholders have owned the property, which is a Trailer Park, for about 10 years. The LLC owns Goodwill, land, Utility hookups and some minor improvements. The original purchase was for land and goodwill. This appears to be a Sec 1231 transaction with no losses, only gains. Question: Does party being bought out have depreciation and amortization recapture to deal with in this transaction or, assuming Sec 1231, does it have only a capital gain of the difference between selling price and basis?

sometimes fails me.

I would say it is a Sch D transaction.

[Snaggletooth]

Sch D Only

So long as only the SHARES of the LLC are being sold, the sale is reported on Sch D.

If the assets/property is owned by the LLC, and the LLC is not disposing of the assets, then there is no 4797.