Discussion:Treasury Stock Question
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Discussion Forum Index --> Basic Tax Questions --> Treasury Stock Question
Discussion Forum Index --> Tax Questions --> Treasury Stock Question
| 17 June 2008 | |
| It's been so long since I have had a corporation buy the stock of one of its stockholders that I don't remember how to do it. If the corp buys the stock for $200,000, I know that I should debit Treasury Stock and credit Cash. If the stockholder had paid $1,000 for the stock originally (so that amount is in the Capital Stock Account), what do I do with that $1,000? Do I leave it there or do I debit Capital Stock and credit Treasury Stock? | |
| 17 June 2008 | |
| The entry you indicate is correct, as Treasury Stock is recorded at cost. As the stock is still issued (even though not outstanding), there is no change to the to the Capital Stock account. On the balance sheet, the capital section looks the same as before except there would be a reduction at the end of the stockholder's equity section similar to:
Less Treasury Stock, Common (xxx shares at cost) -200,000 | |
| 17 June 2008 | |
| Thanks SCCPA. That's what I thought I should do. I should have also asked, what do I do with the amount in that person's AAA account? | |
| 17 June 2008 | |
| Also, see 312(n)(7) re the impact on earnings and profits if the S corp was previously a C corp | |
| 17 June 2008 | |
| Where does it disappear to? Do I debit AAA-Joe Smith and credit AAA account? | |
| June 17, 2008 | |
| He shouldn't have his own AAA acct. It's only the corps'. Also note that a few states do NOT allow for T Stock or recognize it. Make sure yours isn't one. Search box on T stock should pop the last time it was discussed. | |
| 17 June 2008 | |
| Really? I have always kept track of each stockholders AAA accounts separately... | |
| June 17, 2008 | |
| There's another thread on this just yesterday. In the mid 80's, the law was changed so that the S/H's do NOT own AAA, only the corp. Now, they have basis, of course, but you don't split the AAA. And this reminds me again of why, with multiple S/H's, I dump the AAA into NP's automatically so that I have an accurate record and distributions are always in accord with percentage of stock ownership. | |
| June 17, 2008 | |
| This one, near bottom of page: S-Corp Shareholder quits w/ negative equity | |
RoyDaleOne (talk|edits) said: | 17 June 2008 |
| Well, if the shares are in the treasury they are avilable for reissue, however, if the shares are cancelled then the shares are no longer in the treasury and no longer available for reissue.
When the shares are cancelled you remove them from the treasury stock account, which now should be zero to reflect the fact there are no shares in the treasury. | |
| 17 June 2008 | |
| Roy, what's the AJE for that? Credit Treasury Stock $200,000, Debit ????? | |
| 17 June 2008 | |
| Debit common stock for the par or stated value (or the value they were issue at), debit APIC for any amounts paid over par or stated value, debit retained earnings for the difference, which may well drive RE negative.
In at least one state (WA) there is no such thing as treasury stock as stock is retired and available for reissue immediately upon repurchase by the corp. | |
| 17 June 2008 | |
| Actually the shares that the corporation bought from the shareholder are going to be sold to a new shareholder for the same amount of money the corp bought them for. So then I assume the JE would be debit Cash for $200,000 and credit Treasury Stock for $200,000??? | |
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