Discussion:100% Purchase of S Corporation Stock
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Discussion Forum Index --> Tax Questions --> 100% Purchase of S Corporation Stock
| 9 January 2007 | |
| My client purchased 100% stock of S Corporation.I am not sure how to file tax return? Is it going to be two return for one year showing transfer of stock? | |
| 9 January 2007 | |
| One return for the year. Taxable income gets allocated on a per share per day basis unless an election is made to use a cutoff method. See
http://www.taxalmanac.org/index.php/Discussion:S-Corporation | |
| January 9, 2007 | |
| Get the old returns, continue on with K1's for the old shareholders and the new. Best is to elect to close the books the date of sale, everyone must sign off, and that keeps profits/losses for respective shareholders with them. | |
| 9 January 2007 | |
| Let me clear myself from above discussions.I can elect to close the books the date of sale when we file old return and file a new return from the date of purchase for new shareholders. | |
| 9 January 2007 | |
| No. You cannot elect anything. The election to close the books requires the consent of all the shareholders. There is only one return. The k-1's will either reflect income broken at date of sale or, in the absence of the election income for the year prorated by days of ownership. | |
| 6 March 2007 | |
| My client paid about 2.1M for the 100 % stock purchase of S Corporation.My understanding is that 2.1M wouldn't reflect anywhere in the books of the S Corporation but when they sell the stock in future, 2.1M will be the cost of the stock. Please advice
Thanks | |
| 13 March 2007 | |
| I am preparing the tax return right now and don't know how to show that 2.1M.They borrowed 2M from the bank under the business name.So I am showing that as a liability but don't know whether to show it as an investment or loan to shareholders on the other side. | |
| March 13, 2007 | |
| Working this out:
1st deal, borrowing the money: Dr. cash 2.0 m Cr. NP-Bank same. 2nd deal, corp buys out old S/H...Cr. cash 2.1 M Dr. T Stock as I see it. 3rd, new S/H buys in: Dr. Cash .1 M Cr. T stock...I dunno, something like that it looks like...? | |
| March 13, 2007 | |
| I agree, didn't bother to tell him that, but the S/H only used 100k of his own money, not 2.1m. Not my deal. | |
| 13 March 2007 | |
| Jigisha...these guys have you covered...I would only add to make sure you know who the obligor on the note is. I've seen times where the obligor is the shareholder, but the corp is paying back the note, so they want it on the books. Just a note of caution, as you get a different answer. | |
| 22 March 2007 | |
| What is the form needs to file for the election to close the books at the cut off date? | |
| 22 March 2007 | |
| Another issue is whether the s/h purchased 100% of stock for $2.1M and borrowed $2.M from bank to do it, versus s/h purchased $100k of stock and the $2M is a corporate stock redemption (a "bootstrap purchase"). Very different results. Have you looked at the stock purchase agreement and all related documents? | |
| 29 March 2007 | |
| Another question on the topic. An owner sells 100% stock in an S Corp mid '06. The EIN was kept along with the name, etc. The new owner filed a short-year return for the corporation encompassing only his ownership period. The seller would like to have filed under Sec. 1377(a)(2), but a return was already filed for the corporation (w/o extensions) and it is past March 15.
Can the return be amended to reflect a 1377 election? If not, what are the seller's options for reporting his portion of the year's operations, sch C? | |
| March 29, 2007 | |
| I'd say that the return MUST be amended. There are no other options. Apparently the new owner don't quite git it, that he bought the stock. So someone needs to 'splain it to him and he can be assured when the K1 comes out the same... | |
| 29 March 2007 | |
| So can the amendment include the 1377 election, or will the allocation of income end up with the default treatment? | |
| 29 March 2007 | |
| well from that last post, new owner's k1 stays the same so I assume the election should be allowed. | |
| 29 March 2007 | |
| ...if the Seller knows what income should have been reported to him, he can file Form 8082 and report it without waiting for a schedule K-1 | |
| 29 March 2007 | |
| So the amended return is out of our hands for the time being. Would the process be: 1)notify new owner to amend with 1377 election and issue k1s to our client, and then 2)file 8082 with our client's return to notify IRS he did not receive a K1(he is an SCorp shareholder so I thought there were restrictions with 8082)? | |
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