Taxes on Stock Transfer

[SFlSportsFan]

What is the name of your state (only U.S. law)? Florida

My business partner and I have a S-Corp. He owns 70% and I own 30%. Because of his personal debt, he has not been paying me my share of profits. He is now about $20,000 in debt to me.

He has offered to give me stock in the company as payment. Are there tax implications to this stock transfer? If we value the stock at $100 per share and I get 200 shares? What are the tax concerns?

ThanksWhat is the name of your state (only U.S. law)?

 

[tranquility]

Even if the profits are not distributed, you owe taxes on the amount. If stock is given from the corporation, at least you get something for the profit. The other party should pay his loan off to the corporation using stock and then you get the distribution from the corp. Your basis in the stock is the value of the distribution.

If you get the stock directly from the other party, you have a separate transaction. You are buying the stock from him for some amount. I don't know the amount or the discounts or the whatever, but it would have no relationship with the income you will get on the K-1 from the corporation.

Clearly, you two should see a CPA and work out some of your problems and understandings regarding the S-corp. It sounds like there are problems brewing and you will not handle things correctly.

 

[LdiJ]

Even if the profits are not distributed, you owe taxes on the amount. If stock is given from the corporation, at least you get something for the profit. The other party should pay his loan off to the corporation using stock and then you get the distribution from the corp. Your basis in the stock is the value of the distribution.

If you get the stock directly from the other party, you have a separate transaction. You are buying the stock from him for some amount. I don't know the amount or the discounts or the whatever, but it would have no relationship with the income you will get on the K-1 from the corporation.

Clearly, you two should see a CPA and work out some of your problems and understandings regarding the S-corp. It sounds like there are problems brewing and you will not handle things correctly.

I agree that you both should be consulting a CPA. If he is taking distributions himself (to pay his personal debt) without making proportional distributions to you, that's a serious problem. If he is taking distributions in excess if his share of the accumulated earnings/basis, that is a serious tax problem for him as well.