From TaxAlmanac, A Free Online Resource for Tax Professionals
From TaxAlmanac
Discussion Forum Index --> Tax Questions --> S-corp stock sale
Jdr74 (talk|edits) said:
| 27 July 2007
|
| I've read most of the other threads on this but thought I'd pose my specific question here on determing stock basis on the date of sale of s-corp stock - not weighted-average. To make it easy, let's assume that the s-corp had three original owners at 70/20/10, the corp was opened 01/01/07 and has an (10,000) operating loss YTD. If the three original owners each agreed to sell 10% of their shares to a fourth owner, how would each determine their basis for gain/loss? From reading the other threads, I would think in this case since first year that it would be: original investment - % loss YTD = basis, which would then be further divided by # of shares owned to determine per share basis on that date. Is this how it works? Also, what if one of the original shareholders loaned money to the company, would this affect her basis when determing gain/loss?
Thanks for the info.
|
Pegoo (talk|edits) said:
| 27 July 2007
|
| Loan to from share holder to scorp does not affect their basis when determining gain and loss.
|
Jdr74 (talk|edits) said:
| 27 July 2007
|
| Thank you both for the answers. In another twist, if the %loss YTD exceeds the original investment then the SH effectively has no basis in his shares at that point, right? Thus, any cash received for those shares will be a STCG since this occurred during the first year?
|
Jdugancpa (talk|edits) said:
| 27 July 2007
|
| Your question is about basis, but it appears to me you have a misunderstanding about how income gets allocated in an S corp when there is an ownership change mid-year. The default method for allocation of income & loss in an S corp which has had an ownership change mid-year is the "per share per day method". So, if ownership changes on 7/1/07, unless an election is made to use the alternative method, income would be allocated among shareholders pro-rata based on the number of shares and the number of days the shares are held. So, if A owns 100% from 1/1/ - 6/30/07 and B owns 100% from 7/1 - 12/31/07 and YTD earnings are $0 at 6/30/07, if income at end of year is $365, it would be allocated $181 to A and $184 to B. If that type of allocation is not desired (probably wouldn't be) an election may be made to use a "cutoff method" which allocates based on YTD earnings as of the date of ownership change.
|
Proven (talk|edits) said:
| 15 February 2008
|
| If shares were sold to shareholder 4 and he bought 10% of ownership from other 3 shareholders for $30,000 what would shareholder 4 have as basis in the s corp? If the corp lost $10,000 the next full year after the purchase would sharehold 4 have basis to take pro rata share of loss?Proven 22:50, 14 February 2008 (CST)
|
To join in on this discussion, you must first
log in.
