Wife No Longer S Corp SH

[David]

Wife was no longer a SH in H&W S Corp effective 8/31/15. She has a remaining basis of $1,145.

What happens to her basis? Does it "disappear" and is ignored? Does she report a loss in 2015? Can her basis be transferred to the H's basis? If so, where is this done in the tax program?

I can't seem to find anything on how to handle this.

Thanks for your help.

 

 

[OldJack]

No it doesn't disappear or is ignored.  You must determine facts as why she is no longer a shareholder and treat accordingly.

[David]

The reason given to me was that wife is not involved in the business and they didn't want wife to be legally liable for anything to do with the business.

Given this, how is her remaining basis handled?

 

[jklcpa]

You still didn't give us, or don't have, enough information to answer the question.

Were her shares in the S corp redeemed by the company?  Was her ownership gifted or sold to husband or someone else?  Exactly what happened to her ownership?  Once you determine that, you should know how to record the transaction.

[David]

I have already asked for this information from the client and am waiting for an answer. Thanks for your help.

[OldJack]

Assuming the wife gave her share of stock to her husband there's no taxable transactions and the stock basis transfers to the husband.

 

[David]

The wife transferred her shares to her husband. I realize that it is a non taxable transaction. The only way I see to handle this is on the basis statement. An increase to the H's contribution and a decrease to the W's contribution for the W's remaining basis amount. Is this the correct way to report this or should it be reported another way?

Thanks.

[OldJack]

It's how I would do it.

[David]

Thanks for your help.