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Forms for S-Corp Transfer of Shares

I co-own an S-corporation (50/50) with a partner. My partner will be leaving the business and I'll be buying some of his shares (all but 10%). Are there any tax forms (IRS or VA state) I need to file for the transfer of shares? Or is it done on the annual 1120S form? 

3 Replies

Forms for S-Corp Transfer of Shares

there are no forms to file.  there should be a written buy/sell contract. make sure you keep track of the tax basis of both your original shares and the shares you buy.  this is crucial should you ever sell out, liquidate or incur losses.


Forms for S-Corp Transfer of Shares

I HIGHLY  recommend you seek local professional assistance to file this return with a change in ownership so you get it right the first time especially if you do not understand the 1120-S form well and/or you don't keep good bookkeeping records.  

Forms for S-Corp Transfer of Shares

Another important factor is that you need to pay attention to the allocation in the year this change occurs.

This is due to the fact that the allocation needs to be done on a per share per day allocation.

In addition, you will need to pay attention to any distributions and make sure you document the support for how the distributions were determined as a result of the varying interest.  Depending on the timing of any distributions, they may appear non prorata and you may receive a notice (or paper audit) as a result.  That is why it is important to document the time period that the distributions are related to which supports that the distributions are indeed prorata.

*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
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