I have an 1120S corporation. We received equity for services rendered. We sold the shares and now I'm wondering how to treat the sale for tax purposes?

ANSWER

The BIDaWIZ Team's Answer:

This question falls under IRC Section 83, "Property transferred in connection with the performance of services." In this case, the character of the transaction as occurring in a trade or business would dictate the proper tax treatment as ordinary income. The sale would not be treated as a capital gain.