Is Balance of Scorp AAA account adjusted when a shareholder sells out

[terryats]

I agree. It seems adjustments are only for redemptions, liquidations, reorganizations, and divisions, and not selling shares

[AusTaxCPA]

If I have understood the article. There is no adjustment required to the AAA account. What do you think?

[terryats]

Here is a good source of info on S-Corp AAA account.

https://www.thetaxadviser.com/issues/2017/aug/tracking-aaa-ep-transactions-involving-s-corps.html

[Harvey Lucas]

Two shareholders, each own 50%

The balance in their Scorp AAA account was approx 5 million on 12/31/23.

Their total Stock outside basis was also approx the same, ie, 5 million.

On 1/31/24, Shareholder A paid Shareholder B 4 million for her shares. and shareholder B exited the company.

On shareholders B 2024 1040 I will report gain on sale of stock 1.5 million (4 million sale price less her share of basis 2.5 million)

Shareholders A outside basis in his shares after the sale is 6.5 million (his half of original 5 million basis plus the 4 million he paid to buy her out)...correct?

For simplicity's sake, let's say that at year end 2024, the net profit/loss for the entire year of 2024 is zero and there were no Shareholder draws for 2024.

Do I make any adjustment to the AAA account for the stock sale transaction?

Thanks