I sold my scorp and buyer got a new EIN before the sale- do we do 2 different tax returns because of the 2 EIN's?

[ironman99223]

My son and his partner bought my scorp but applied (and received) a new EIN prior to the sale.  Does this now require us to do two different tax returns? I'm assuming I would do a return for the business using data from before the sale, my son would use data from after the sale, and I would notify the IRS that the business with my EIN ended once the sale was completed

[Mike9241]

to respond fully, we need to know more details as to what occurred. which is true?

1) they personally bought your S-Corp stock

2) their corporation bought your S-Corp stock

3) they personally bought your corporate assets 

4) their corporation bought your corporate assets

[ironman99223]

technically, they bought the stock (my son and his partner bought the business and we did the transaction without any real legal advise to save money) and I thought they were responsible for the tax return with the K1's reflecting the 2022 profit based on the  percentage of ownership over the calendar year.  To me, it seems that the IRS would view us as two different companies and I would file a final 2022 return with a notice of dissolution for my business/EIN

[ironman99223]

it was my son and his partner purchasing, we were just looking for the easiest, most cost-effective way of doing the transaction.  The money was paid from a personal account but we set up the purchase agreement as a stock purchase

[Mike9241]

if it was a stock purchase they paid for directly then the old corporation continues  (the same as what happens when publicly traded stock is bought and sold) and the S-Corp election continues unless they file to terminate it. if it is not terminated there are two ways to allocate income

1) the per share, per day basis., a shareholder selling their stock would be allocated a share of the corporation's annual income based on the percentage of the outstanding stock of the corporation he/she held, and the percentage of the year they held it. The transferor (you) , not the transferee, is considered to hold the shares on the day of the sale or disposition.

2) with the consent of all the shareholders (including the old and the new shareholders), elects to do so, it can close its books on the end of the day of the sale, meaning the S corporation will in effect have two short tax years in one year. you get allocated the profit or loss the S-Corp made including the date of sale.  the others get allocated the profit or loss after the date of sale based on their respective ownership of the shares

still one return. 

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someone else would have to inform you if Turbotax can do this as well as anything else that needs to be done to use this method

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they will need to keep track of their tax basis. that's because it starts off with what they paid you not your basis. 

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if they paid a premium over the book value of the corporation, they get no tax benefit until they dispose of the stock. probably tax efficient for you  - capital gain/loss (if a loss it could be limited due to the sale to a related party). it was not tax efficient for them.