s-corp share holder

[ardi600]

if shareholder gives up his share in an s-corp, my understanding is not to list him as a share holder and not to issue an income. and ofcourse, his percentage needs to go to someone(new shareholder or old shareholders). when filing 1120s, does irs require this to be reported on any form? what happens to his basis assuming he could says he gifted his share to another share holder and the value was less than 13,000.
I am just leaving him off the corp on the 1120s, and since the assumption is he gifted his shares there is no tax consequences. please advise,

[Bees Knees]

I'll answer part of your question. If a shareholder sells or gifts his stock to another person during the year, there is still a K-1 issued to that shareholder for the portion of the year prior to the gift. See "Pro-Rata Allocation/Per-Share/Per-Day", page 19-7 of TTB, to determine what portion of S corp items get allocated to the shareholder on a K-1.

[Burke]

And to carry this further, the shareholder who GOT the surrendered share should have two K-1's. One prior to the transfer with the former percentage of ownership, and one after the transfer with the newly increased percentage of ownership. Unlike individuals, their status is not determined at the end of the year, but when the transaction took place.
You accomplish this by doing two 1120S returns, both short years.

[ardi600]

actually this was

as of the end of last calendar year (2010), so i believe one k1 and one 1120s would apply in this case. the share holder that left did not own his share as of 1/1/2011