Form 6252

[Christian]

A client has shares in an S corporation which is going to be sold. Under the agreement he will tender his shares but the payments for them will be made in three payments over the period 2022-2024. He will have a capital gain from the sale and since it is in instalments I am wondering if it should be reported on Form 6252. I have reported the sale of real estate assets on this form but no sales of stock and am researching if this is allowed.

[Lee B]

This in depth article in The Tax Advisor should answer all of your questions:

 

https://www.thetaxadviser.com/issues/2021/aug/comparing-stock-asset-sales-s-corporations.html

 

When you say tender his shares, if that means back to the S Corp then it doesn't appear to qualify.

[DANRVAN]

4 hours ago, Christian said:

Under the agreement he will tender his shares but the payments for them will be made in three payments over the period 2022-2024.

That appears to be a redemption that would be treated as an exchange under sec 302(b).

If it is treated as an exchange, it can be reported under the installment method.  

Once you get to that point, you follow the installment sale rules such as related party sales and nondealer rules of section 453A.

[Christian]

I suspect I misspoke. His shares are being acquired by the purchaser and not tendered to the existing company.

[Lynn EA USTCP in Louisiana]

Installment method is available for the sale of privately held stock.

[DANRVAN]

14 hours ago, Lynn EA USTCP in Louisiana said:

Installment method is available for the sale of privately held stock.

and sales of public traded stock is prohibited per section 453(k)(2).

[Lynn EA USTCP in Louisiana]

Danrvan, true. My comment was incomplete and should have included the phrase “not sold via public trading”. 

[DANRVAN]

I knew that was what you meant!