☰
✕
Sign In

Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
New Member
posted Feb 7, 2021 5:03:16 PM

Shareholder left in 2020

My s corp went from two shareholders to one in 2020. What reporting requirements does this create?

0 2 275
2 Replies
Level 1
Feb 7, 2021 5:19:39 PM

The change won't affect you reporting requirements. You will still have to file 1020S federal tax return and applicable states' returns, if any. The only difference, you'll issue one K-1 instead of two.

Level 13
Feb 7, 2021 6:06:38 PM

There are a couple of items to keep in mind:

  • You will need to make sure that the one shareholder's K-1 is marked final
  • Only current year distributions are reflected on the K-1
  • If the former shareholder received any liquidating distributions, those must be reported on a form 1099-DIV in box 9 or 10 as applicable.
  • If the S corporation "redeemed" the one shareholder, then you will need to reduce the AAA by the applicable ownership percentage of the former shareholder if the redemption qualified as a sale or exchange.  Based on the limited facts, it appears that it does qualify since the former shareholder completely terminated their ownership.