Please confirm, when shareholders buy and sell stock outside of the corp (no transactions on the company books other than maybe a new loan to purchase treasury stock), they track their basis for capital gain/loss purposes on an external (outside) basis, but the internal basis as a shareholder against distributions (or allowed losses) is still more or less the AAA amount on Form 1120S Schedule M-2.
Another way of putting this is, when the IRS requires that a shareholder basis statement be provided with the tax return, it would not normally show stock sales or purchases made by the shareholder (other than the initial contribution for capital stock issued at start up).
I have prepared a handful of S-corp returns for a number of years now, but first time I've had to deal with one shareholder (50/50) being bought out and a new shareholder (80/20) being brought in. Fortunately the transfer of ownership happened at the beginning of the year ( or was it the end of the prior year?) so no complicated shareholder days-of-ownership calculations.
Another way of putting this is, when the IRS requires that a shareholder basis statement be provided with the tax return, it would not normally show stock sales or purchases made by the shareholder (other than the initial contribution for capital stock issued at start up).
I have prepared a handful of S-corp returns for a number of years now, but first time I've had to deal with one shareholder (50/50) being bought out and a new shareholder (80/20) being brought in. Fortunately the transfer of ownership happened at the beginning of the year ( or was it the end of the prior year?) so no complicated shareholder days-of-ownership calculations.
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