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Posted by Paul Thomas, CPA on March 18, 2007, 2:37 am
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> A previous employer sent me a K-1 showing about $2000 in
> income (I own a tiny percentage of the company). I haven't
> worked there in 5 years, and I know I will never see a dime
> from this company ever again.
>
> Is it legitimate for me to be taxed on money I will never
> see? Should I pursue selling the stock back to them?
Yes, it's income to you, and yes it's taxable even though
you haven't "seen" the money.
The profits you are taxed on adds to your basis in the
company.
Yes, you should look into selling the shares to someone
(probably your cheapest "out"). If necessary get an
attorney involved to protect your interests.
When you sell the shares you own, you can claim a gain or loss on those
shares based on your tax basis. So while you have to include that as income
today, you will get some amount of "loss" in a future year.
--
Paul Thomas, CPA
paulthomascpapc@bellsouth.net
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