I have an s corporation client that purchased a departing shareholder's shares for less than his basis. His basis is approximately $185,000 and the corporation paid him $100,000. This is now treasury stock on the books of the s corporation. My question is, what happens to the other $85,000 of basis that this shareholder is forfeiting (foolishly)? Does this increase the remaining shareholders' basis'?
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I don't think it goes anywhere, besides as a loss on the seller's personal return.
If the stock was sold to a third party, the third party's Basis would be $100,000. The third party would not receive that extra $85,000 in Basis. I would think the same would apply in your situation. -
In addition to the other reply post, the following articles by a Tax Attorney may or may not provide additional detail to your scenario if needed:
https://www.taxlawforchb.com/2015/02...d-corp-part-i/
https://www.taxlawforchb.com/2015/02...-corp-part-ii/Last edited by TAXNJ; 07-28-2020, 08:50 AM.Always cite your source for support to defend your opinionComment
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