Sale of S Corp stock-Basis?

[Happy Camper]

Taxpayer is selling 5% of his S Corp stock. He added 10% of stock to his holdings a few years ago. Would his basis of the 5% sold be 5% of his total current basis? Or can he calculate the basis of the 10% he added a few years ago and use that for the basis of this 5% sale?

Thanks for any and all input

[TAXNJ]

TTB starting at 19-7 as a good reference point

[Happy Camper]

Have reviewed

Have reviewed TTB, but I do not see where it addresses this issue. Can S Corp use 'specific shares' to assign the basis for a sale of a portion of stock? Or are they required to use essentially 'average basis'?

Thanks in advance

[TAXNJ]

Have reviewed TTB, but I do not see where it addresses this issue. Can S Corp use 'specific shares' to assign the basis for a sale of a portion of stock? Or are they required to use essentially 'average basis'?

Thanks in advance

Without knowing what else your research has taken you but here is one more area keeping in mind not all inclusive. Since you are the one handling the issue and have more info that you are aware related to the issue only you can decide what research on your own satisfies your question.

http://www.taxlawforchb.com/2015/02/shareholder-buy-outs-in-a-closely-held-corp-part-i/

[Happy Camper]

After more research...

According to publication 550, there are only two ways to calculate the cost basis of stock that is not a mutual fund and that is FIFO or specific shares. It appears to me that S Corp shares would fall into those two categories. If I just took the total current basis and multiplied by the % the shareholder is selling, that would be average cost.

Therefore I will be calculating the SH basis by allocating the basis adjustments on a per-share, per-day basis and be sure that any documentation of the sale adequately identifies (required by Pub 550) the shares that are being sold.

Thanks TAXNJ for the additional reference.