If your partner retired and sold his shares, the IRS treats a full redemption of C corporation stock as a sale. Did your C-Corporation buy out your former business partner's full stock in the company?
Form 1099-B may be required if the company is considered a broker.
- Per the IRS, a broker is any person who “effects sales to be made by others.” The definition includes corporations that regularly stand ready to redeem their own stock or retire their own debt.
- If a company purchases shares of stock from shareholders on an irregular basis and does not actively pursue or stand ready to make redemptions, it would not be required to file Form 1099-B.
- However, if a company promotes a buy-back program of shareholders’ shares, it is considered a broker and would be required to file Form 1099-B. There is no dollar threshold for filing Form 1099-B.
- In fact, separate transactions and different types of securities are required to be reported on separate 1099-B forms, or substitute statements must be used. Form 1099-B must be provided to recipients by February 15 of the year following the transaction year.
Tax liability for the exiting partner depends on whether the person has a cost basis in the stock.
@knoc90236
[Edited: 02/24/2024 | 3:58 PM PST]
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