S-Corp Basis Question on Sale of Stock

I have a client who had 2000 shares(20% ownership) in a S-corp, which does business as a hotel. During 2017 he sold 300 shares for $40,000.00. In regards to his Shareholder Basis Worksheet, would i reduce the sellers basis in the stock by 40000.00? And if so, would i just list it under "other decreases".

Welcome to the forum, Simon!

I'm gonna let somebody else here answer your question, cuz I have places to go tonite.

You reduce his basis by 300/2000 of his basis immediately before the sale of the 300 shares.
On the S Corp, there may be a AAA adjustment for the shares sold, too.

On the S Corp, there may be a AAA adjustment for the shares sold, too.

This would only apply if the shares were redeemed.

Correct. I realized that after I posted.

Thank you, i appreciate it.

Basis in S-corp stock is accounted for on a block-by-block basis. See Reg. Sec. 1.1367-1. If you only have one block, block-by-block accounting is still required, it’s just that there’s only a singular basis amount for all those shares (and you’d also have the same per-share basis for each share).