Scenario is S corp in California, Three working partners with 25k stock each. One owner is retiring. Buy sell agreement states that the company will buy back his stock with 10% down payment and rest with a note with equal monthly installments over 10 years. Now the company is giving him a lot of money. Can the company write it off somewhere for taxes as an expense or not. Thanks

asked 13 Feb '10, 21:01

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Jerry
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edited 28 Jun '10, 21:55

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This transaction is a redemption and is not deductible as it is a capital expenditure. However, the interest on the deferred portion of the payments over ten years is deductible and is imputed if not separately stated as an additional payment.

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answered 13 Feb '10, 22:20

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Brent Berkman
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First off, they are NOT partners; they are S/H's. What is his stock/debt basis?

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answered 13 Feb '10, 22:21

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SandySea
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Thanks , stock basis is $1 a share. And company buy back price is $ 20 a share. So he is making a lot of money.

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answered 15 Feb '10, 17:24

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Jnagra
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Case: California S-corp with two partners; one partner sells all his stock to another. Is the buyback transaction counted as a personal or company expense for the buyer?

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answered 22 Jan '12, 23:54

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Asked: 13 Feb '10, 21:01

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Last updated: 22 Jan '12, 23:54