Shareholder A in an S-corporation had $0 stock basis and $100,000 of Debt basis (from loans provided to the corp over the past few years - that have never been paid back).
Shareholder A wishes to no longer be involved in the business. Shareholder B wants to continue the business. Shareholder A agrees to take payments on the loan.
Questions are this:
1. How are the payments treated?
2. What happens to the Debt basis?
3. What happens to the Shares owned by A?
Is B buying A's shares?
Is the S Corp buying A's shares?
The payments on the loan are treated as loan payments. Debt basis is reduced by loan repayments.