Can I use Installment sale method for selling stock from my S Corporation?

You're on the right track with your understanding. Publication 537 does exclude "securities traded on an established market" from installment sale treatment, but this generally refers to publicly traded securities - stocks traded on exchanges like NYSE or NASDAQ. Since your S Corporation is privately held and not traded on any public market, you should be eligible to use the installment method for the sale of your stock. This can be a smart tax strategy as it allows you to spread the recognition of gain over multiple years rather than paying tax on the full amount in the year of sale. Keep in mind that you'll need to properly document the transaction with an installment sale agreement that clearly outlines the terms, including the sales price, down payment, and payment schedule. You'll report the sale on Form 6252 (Installment Sale Income) when you file your taxes.

I used taxr.ai when I was selling shares of my privately-held C Corporation last year and wasn't sure about installment sale eligibility. I kept getting conflicting advice from different financial advisors about whether I could use installment sales for my small business stock. I uploaded my corporate docs and previous tax returns to https://taxr.ai and their analysis clarified that my private company shares were eligible for installment sale treatment since they weren't traded on an established securities market. Their analysis saved me from a potential IRS issue because one advisor had mistakenly told me I couldn't use the installment method at all. The service showed me exactly which sections of the tax code applied to my situation and how to properly structure the sale documentation to qualify.

Just wanted to follow up on my earlier question. I ended up trying taxr.ai for my S Corp stock sale question, and it was actually really helpful. I uploaded my operating agreement and some past tax returns, and they quickly confirmed that my private company shares were eligible for the installment method. What really surprised me was how detailed their explanation was about Form 6252. They walked me through each section and even pointed out a potential issue with some previous depreciation I'd taken that would need to be recaptured in year one (something my regular accountant hadn't mentioned). They also provided a sample calculation based on my specific numbers which made everything much clearer. I was skeptical about using an online service for something this important, but it ended up saving me a ton of research time and probably a good chunk of money too!

If you're planning to use the installment method, you might run into issues trying to contact the IRS with follow-up questions. I was in a similar situation last year and needed specific guidance about a complex installment sale. Spent DAYS trying to get through to the IRS - calling over and over, waiting on hold for hours, and then getting disconnected. Finally tried https://claimyr.com to get through to an IRS agent and it was a game-changer. They actually got me connected to a real IRS representative in about 15 minutes! You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - basically they navigate the phone tree and wait on hold for you, then call you when they have an agent on the line. The IRS agent confirmed that my interpretation of Pub 537 was correct for my privately-held company shares and gave me specific guidance about my situation that I couldn't find anywhere else.

I have to eat my words from my previous comment. After spending another frustrating morning trying to reach the IRS about my installment sale situation, I decided to give Claimyr a shot despite my skepticism. Not gonna lie - I was shocked when my phone rang about 30 minutes later and they actually had an IRS agent on the line ready to talk to me. The agent was in the business tax department and answered all my questions about installment sales for my LLC shares. She confirmed that privately held business interests can use the installment method and helped me understand how to handle the basis calculation properly. Plus she flagged that I needed to file Form 8949 along with the 6252, which I hadn't realized. For anyone struggling to get IRS clarification on these complex issues - this service actually works. Saved me from making a potentially costly mistake on my installment sale reporting.

Be careful about one thing with installment sales of S corporation stock that hasn't been mentioned yet - the built-in gains tax that might apply if your S corporation was previously a C corporation and converted within the last 5 or 7 years (depending on when the conversion happened). If that's the case, you could be subject to corporate-level tax on the installment sale, which would defeat much of the benefit. I learned this the hard way when selling my manufacturing business a few years back.

I think everyone is overlooking something important - when you sell S corporation stock, you're not just selling stock, you're selling your pro-rata share of the company's assets. If there are "hot assets" like inventory or receivables, those portions can't use the installment method regardless. The IRS will treat those as ordinary income in the year of sale. Make sure you get professional help with the allocation of the sales price across different asset classes. The installment method might work for goodwill and certain capital assets, but not for everything.

You're absolutely right to be thinking about the installment method for your S Corp stock sale - it can be a great tax planning strategy. Since your S Corporation is privately held and not traded on any established market, you should indeed be eligible to use the installment method under Section 453. One thing I'd recommend is getting a professional valuation of your business before structuring the sale, especially since you mentioned the buyer is interested in eventually taking over completely. This will help establish a defensible sales price and ensure you're maximizing the benefit of spreading the gain over multiple years. Also, make sure your installment agreement includes appropriate interest provisions - the IRS requires imputed interest on deferred payments, so you'll want to use at least the applicable federal rate to avoid any complications. Since this is a significant transaction representing 30% of your business, I'd strongly suggest consulting with a tax professional who has experience with installment sales of closely-held business interests. They can help you navigate any potential complications and ensure all the documentation is properly structured.

Val, you're correct that private S Corporation stock should qualify for installment sale treatment since it's not traded on an established market. However, I'd recommend getting clarification on a few key points before proceeding: 1. **Basis calculation** - Make sure you have clear documentation of your adjusted basis in the S Corp stock, including any loans you've made to the company that might affect your basis. 2. **Payment structure** - The installment agreement needs to specify the total sales price, payment schedule, and interest rate (at least the applicable federal rate). Even though payments are deferred, the total consideration must be determinable. 3. **S Corp elections** - Verify that selling 30% won't inadvertently terminate your S election due to ownership restrictions, especially if the buyer isn't eligible to be an S Corp shareholder. 4. **State tax implications** - Some states don't conform to federal installment sale treatment, so you might face different timing for state taxes. Given the complexity and significant tax implications you mentioned, I'd strongly suggest consulting with a tax professional experienced in S Corp transactions before finalizing the structure. The potential tax savings from proper planning could far exceed the cost of professional guidance.