A couple owned an S-corporation together. They divorced. Husband received a piece of land out of the S corporation as part of the settlement. The warranty deed is from the S corporation directly to the new company now owned by the husband. Husband relinquished his original shares of the S corporation as consideration for the property. How is this recorded on the S corporation level? Is this treasury stock? The FMV and basis of the land appear pretty much the same. And does this affect the wive's inside or outside basis at all?
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I'm in favor of Treasury Stock, such that the corporation records no income or loss on the transaction. If there is a difference between the FMV and original capital stock of the husband, record it as "Additional Paid-in Capital."
There should be no effect on income or loss. If there were, the husband would get a prorated share of income/loss on his K-1 for the length of time he was a shareholder. Doesn't make sense. -
If husbands basis in the original corporation isn't equal to the corp's basis of the land he's taking there would be a gain somewhere wouldn't there be? He'd have a capital gain?Comment
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