S-corp stock transfer

[mbigelow]

Father and son are sole shareholders of an S-corp, 87% / 13% respectively. Father wants to transfer some of his shares to his son, who's taking a larger role in the company, so that they have a 68% / 32% (father = 68%). Father is NOT looking to sell the stock to son, just transfer it. Obviously, the son will then partake in a greater share of the profit/loss of the corporation, but beyond this, what are the tax implications of the transfer itself?

[Uncle Sam]

S Corp Stock Transfer

Depending upon the FMV of the stock value, father may have to report a gift on Form 709 on the value being transferred to son, and the possible Sec 1377 election to do 2 accounting period allocations to account for the % ownership change - one for the original allocations, the other for the changed allocations.