To add a few comments:
- The facts presented are very limited, with a number of questions that should be addressed. As a result, I would recommend you consult with a tax professional where you can have a one on one to address important issues that may impact your tax implications.
- But at a high level, the S corp may or may not continue in existence. This is obviously one of the facts that is not known; who the buyer was. The buyer may be an ineligible shareholder.
- If the buyer was an eligible S corporation shareholder, you (the seller) will be considered to have owned the stock through the date of sale.
- If the S corporation continues, the shareholder's need to determine how the partial year allocation will be handled:
- The default is that pass-through items are allocated on a per-share per-day rule.
- All affected shareholders who own stock during the year can elect to essentially close the books on the date of sale and the allocation will be based on that split period (specific accounting method).
- This is a very important decision and should be documented as part of the sales agreement, along with any required specific election included with the tax return.
- And to repeat what has been mentioned, you hopefully know your tax basis in the S corporation stock. Your gain, will be the difference between the selling price and your tax basis.
- If the purchase price is paid out in more than one year, you will have an installment sale, along with those reporting requirements.
*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.
