SusanA1
Level 2
06-08-2023
05:20 PM
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Looking for some guidance regarding the AAA account. One of the shareholders of an S Corporation sold his shares in an S corporation (50% of company) to an unrelated party. He sold his shares for $25k and his basis was $40k. I am working on the S corporation tax return. I am showing the new owner with zero inside basis and $25k outside basis. Do I leave the $40k in undistributed income in the AAA and in the retained earnings on the balance sheet?
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sjrcpa
Level 15
06-08-2023
05:26 PM
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Retained Earnings does not change due to a sale of stock outside of the S Corporation.
I think AAA only gets reduced when the S Corp buys back a shareholder's stock, but I would have to research this.
Ex-AllStar
