Tax Treatment of Stock Sales and Redemptions in S Corporations

Summary

This practice note discusses the tax consequences of sales or redemptions of stock in S corporations. Sales and redemptions of stock of S corporations present a number of tax issues for the seller, the purchaser, the corporation itself, and even the shareholders of the corporation not directly involved in the sale, purchase, or redemption. This practice note will contrast the two transaction types to highlight advantages and disadvantages of both types of transaction. Additionally, there are planning strategies that can minimize the tax consequences of such transactions depending on the particular facts and circumstances.