A few additional comments:
- This transaction is called a redemption.
- The facts are limited, so we don't know if this is a complete redemption or a partial.
- This makes a difference, as if it is a partial redemption, the issue becomes more complicated and beyond the scope of a forum such as this.
- Is the full amount of the redemption being paid out in the year of the redemption? This will impact the reporting of the redemption.
- If a full redemption, the S corporation will also need to reduce the AAA balance by the shareholder's ownership percentage.
- You should seek some professional input into this matter to make sure the transaction gets reported correctly
*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.
