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nancy0105
Level 2

Recording an S Corp sale from 1 owner to 2.

I have a client who was a 100% shareholder in an S Corp.  He recently sold the business to 2 of his employees as of 1/1/23.  Sale of the business was $312000.  The S Corp is paying him $3000 per week for 2 years.

How do I record this sale? And how are these $3000 checks coded? 

2 Comments 2
Rainflurry
Level 14

Recording an S Corp sale from 1 owner to 2.

@nancy0105 

 

This is far too complex for this forum.  You will need the assistance of your client's CPA.  They will need to know:

 

1) Did your client sell 100% of the business?

2) Was this an asset sale or a stock sale?

3) If an asset sale, what is the sale price allocation between goodwill, fixed assets, non-compete, inventory, etc.  Also, what was your client's basis in those assets as of the closing date?

 

You mentioned the sale of the business was $312K, but that equals $3K X 52 weeks X 2 years.  Where is the interest on the seller's note?  If this was a no-interest loan, the IRS requires that your seller book imputed interest.  It is an amount that the IRS requires the seller to report as interest income even though they did not actually receive it.  The IRS publishes those rates each month, referred to as Applicable Federal Rates, or AFRs.   

 

 

nancy0105
Level 2

Recording an S Corp sale from 1 owner to 2.

He sold 100% of the Business..  Stock sale

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