Did the seller actively participate in the S Corp's business?

Or were they a passive investor?

Yes, active participant....well kind of , he and brother owned but on the board and got a 1099 for services

so, yes active

Why did he get a 1099 for services instead of a W2?

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@amydeland wrote:

Yes, active participant....well kind of , he and brother owned but on the board and got a 1099

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I believe they need to Materially Participate in it.  It seem doubtful that merely being 'on the board' would qualify for that.