USA S-Corp shareholder is paid to leave well above their basis

Mar 12, 2014
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Shareholder A holds 32% of Company ABC. His basis is $100K but the company gave him 500K. 250K was in cash which I will report as a distribution to Shareholder A. The other 250K is being paid out over the next 5 years. The contract calls for these shares to be pledged/restricted until they are paid for. How to journalize this and how to report on the tax return? Is this pledged stock a distribution on the K-1? Should it go on a schedule D? Is the pledged stock an asset account or an equity or liability? I'm really stuck on this and I can't get a straight answer. It would seem unfair to report the pledged amount as a distribution to Shareholder A.


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