Sale of Sub 's'

[lsmith]

Client sold interest in company and the way that it was done was by selling the stock.
They gave me a cash flow and not double entry accounting to figure out income and expenses.
Thoughts on handling the sale of stock?

[OldJack]

Not enough details to give you a correct answer.

Is this a C-corp or a S-corp stock that was sold?

Are you to prepare the corp tax return? What year?

Are you to prepare the shareholder tax return? What year?

Do you have copies of prior tax returns for the corp and the shareholders?

What was the sale price?

What is the shareholders tax basis in the stock?

[rosieea]

Client sold interest in company and the way that it was done was by selling the stock.
They gave me a cash flow and not double entry accounting to figure out income and expenses.
Thoughts on handling the sale of stock?

Based on what I understand from your post, this transaction involves two (or more?)individuals and has no impact on the corporation, other than, perhaps, changing ownership percentages. In that case, the S-Corp tax return will have to reflect such changes via prorating income & expenses. But, for the sale, the seller will recognize gain or loss on his return. No reporting by the buyer, and his starting basis will be his purchase price for the stock.

If the corporation purchased back the stock, there will be a debit to Treasury Stock, and, of course, there will be a change in ownership percentages.

[Bees Knees]

If it is a sale of stock and not a sale of the assets inside the corporation, it shouldn't be too complicated. Sale of stock minus basis in stock = capital gain or loss, reportable on Schedule D. I believe there might be something about the 28% rate gain issue if the corporation held collectibles, but other than that, its not like a partnership where you have to deal with ordinary income on the sale of hot assets. Its just a Schedule D issue.

Now if you are doing the 1120S for the year of sale, that is another issue. You have to have double entry bookkeeping done. A cash flow statement is not acceptable.

If they expect you to do a years worth of bookkeeping for them, give them your hourly rate and say you have no idea how long it is going to take to get their books in order. You also have the choice of closing the books on the date of sale, or allocating the income and expenses on a per share per day basis. All of that is going to take some time and effort, so don't go cheap on your end of the deal.

[lsmith]

sub s stock sale

Sorry for the brevity of my initial post. TP sold the stock that they owned to another person. The assets and corporation remained untouched. I had come to the conclusion that only a sched d transaction was required on the personal side and the completion of the return for the sub s without any indication other than ownership and percentages made. The sale results in a capital gain of between 10-11000. I sorta complained that I only had a cash flow statement to piece together. After further study, (its been awhile since I've used quickboorks, I am able to produce a balance sheet and Income statement and other information. Thanks for your input.