Shareholder Ownership Change

[ctmorgan78]

Using Turbotax for Business, I have a S-corp ownership percentage change effective for January 1, 2023.  The software interprets this as effective 11:59pm on the change date, so it calculates the percentages for 1/1/23 through 1/1/23, and then 1/2/23 through 12/31/23 (which does have a very small percentage variance).  Changing the effective date to 12/31/22 causes an error in the audit check because the effective date is for a prior tax period.

Thoughts on how to override this nuance?

[ThomasM125]

You can delete the shareholder, you will see an option for that on the Shareholder Information Summary:

You would then have to edit the other shareholder percentages.

[ctmorgan78]

Thanks Thomas.  However this is not the issue; and this is a shareholder add, not a delete.  The issue is the effective date of shareholder ownership change, which should be for the FULL calendar year of 2023 (i.e., all 365 days).  Unfortunately with an effective date of 1/1/23, the software keeps the original ownership percentages for 1/1/23, and then applies the new ownership percentages for 1/2/23 through 12/31/23.  (And if as a work-around you enter 12/31/22 as the effective date, this then shows as an audit flag.)

[ThomasM125]

If the new ownership percentage is effective for the whole year, then you need to enter it in the first column, From 1/01/2023 to 1/01/2023 in this instance:

I did this and when I entered $10,000 of business income, the K-1 schedule listed $5,000 as the income for the shareholders who split profits 50/50 in my example:

[ctmorgan78]

Changing the percentages is not an issue; it is how the software is interpreting the dates.  The first image is where you select the date of the change in ownership (which in this situation is 1/1/2023).  The second is where you then update the ownership shares.  The software is bringing in the prior amounts for 1/1/23, and then only applying the update for 1/2/23 through 12/31/23.

[PatriciaV]

Yes, this is a program limitation. As long as you don't have ownership changes within those dates, you should have no issues. The income allocation calculations generally are made as of the ending date, not the beginning date.

@ctmorgan78