S-Corp shareholders

[Acownt4it]

Husband and wife are 50/50 shareholders in 2005. They want to change this to 51/49 with wife the major shareholder.
Are there any IRS form(s) that need to filed or elections that I need to make in the 1120-S to make this change; or is this like a stock sale and nothing needs to be filed?

I just want to make sure we don't get a letter from the IRS down the road.

[jerome]

Have the husband gift some of his stock to his wife so that she now owns 51% of the company. The gift is a tax free transaction and not subject to gift tax since it is between spouses. Nothing would need to be filed with IRS.

[JoshinNC]

In the IRS's eyes they collectively own 100% of the shares anyway,

so a transfer between them would not be a transfer of shares. At least that's my first inclination. I remember reading in a Pub, maybe the 1120 instructions, that the shares collectively owned by a husband and wife are considered to be owned 100% by each.

[ChEAr$]

Of course it is a transfer of shares

so a transfer between them would not be a transfer of shares. At least that's my first inclination. I remember reading in a Pub, maybe the 1120 instructions, that the shares collectively owned by a husband and wife are considered to be owned 100% by each.

At formation two stock certificates were probably issued, each with 1/2 the number of
shares. To effect this transfer, both certificates are to be turned in to the secretary
who will void each and reissue new certificates with the correct number of shares to
each stockholder.

and of course nothing to be filed with IRS, except the 1120S next time round with
proper allocations on the K-1's.

[JoshinNC]

That's what I meant

At formation two stock certificates were probably issued, each with 1/2 the number of
shares. To effect this transfer, both certificates are to be turned in to the secretary
who will void each and reissue new certificates with the correct number of shares to
each stockholder.

and of course nothing to be filed with IRS, except the 1120S next time round with
proper allocations on the K-1's.

No change with the IRS. Sorry for the confusion.