How to transfer shares to new shareholders

[ZonkerHarris]

Longtime TurboTax Business user. 100% Founder Shareholder sells his 1,000 shares of stock to 2 new shareholders. The sales agreement shows Jan 1 as the date the new shareholders acquired the stock (50%-50%). What are the steps required in TurboTax Business to do this so that so that the business tax return from the prior tax year can be imported correctly and setup the 2 new shareholders in the current tax year? Thanks for any help.

[Anonymous_]

Steps to do this when? 

I'll page @Rick19744 (knowledgeable Champ in this area), but it appears as if you were the sole shareholder throughout the 2023 tax year.

[ZonkerHarris]

Thanks for the reply. I was the 100% SH until Dec 31, 2022. The contract stated Jan 1, 2023 as the date the 2 new shareholders acquired the stock. Does the year really matter?

[Anonymous_]

No, sorry, I assumed it was 12/31/23 for the last year you were sole shareholder.

You need to add the other party as a shareholder as of 1/1/2023. Go through the Business Info section and make the adjustments on the 2023 return under Shareholder Information. You will need to indicate that there was a change in ownership.

[Rick19744]

Based on the limited facts, a few comments:

Yes..... the tax year really does matter.

• A shareholder who disposes of stock in an S corporation is treated as the shareholder for the day of the disposition.  Regulation Section 1.1377-1(a)(2)(ii).
• Not sure what your purchase document says, so hopefully the date of sale was December 31, 2022.  This means that you would not have any ownership in 2023; no one day K-1 if this is the wording in the contract.
• Your facts lead me to believe you technically owned stock for one day in 2023; meaning the sale was technically 2023.
• Hopefully you have maintained your basis in the S corp stock as this is the only way to determine your gain or loss on the sale.
• Additionally, your K-1 should have been marked final.
• You should have completed a form 7203
• Your gain or loss would be reported on your 2022 tax return; unless you are being paid over time, or the sale technically occurred in 2023 as noted above.
• If the contract states that the purchase was on Jan 1, 2023, then technically you should still receive a one day K-1 in 2023 and the new shareholder's took possession on Jan 2, 2023.