Currently we have an 80% 20% ownership split between two individuals.
(1000 shares and 250 shares)
Depending on how the year goes in December 2016, I (majority owner) would like the ownership to be 75% 25% or (1000 shares and 333 shares).
If this is done in December of 2016, I would like the Corporate Return 1120S and K1s to reflect the new ownership for the entire year of 2016,
Is that OK? Of course both shareholders agree this is what they want.

Currently we have an 80% 20% ownership split between two individuals.
(1000 shares and 250 shares)
Depending on how the year goes in December 2016, I (majority owner) would like the ownership to be 75% 25% or (1000 shares and 333 shares).
If this is done in December of 2016, I would like the Corporate Return 1120S and K1s to reflect the new ownership for the entire year of 2016,
Is that OK?====>No; basically in principle, your portion of the s corp income/deductions/losses and credits is determined on a per share per day basis. The s corp needs to allocate an equal amt of each item to each share on a per day basis for the corp?s tax year. The per share per day basis amt is multi[plied by the number of shares the shareholder owned each day of the year. The shareholders? personal tax returns include their allocated yearly totals for each of the s corp tax items.

Of course both shareholders agree this is what they want.
======>>you as a former shareholder, must include all income and losses accumulated by the S corp prior to the sale of the shares. The buying shareholder, the current shareholder , must include all income and losses accumulated by the S corp after the stock sale.A sale of S corp stock takes place anytime a shareholder surrenders stock in exchange for property or a written promise to pay the shareholder in the future. Changing ownership in an S corp is possible but it must be done according to the agreements and contracts in place at the time of the transfer of ownership; the 1120S should reflect the actual ownership of shares. Your corp should( generally, small S corps do not have it) have shares or an Agreement. In the state where the business is incorporated, you will have to submit documentation to the Secretary of State detailing the changes. For tax purposes, the S corp needs to close the books and issue K-1s to you, the old shareholder, based on the business financial activity up until the sale, and then issue K-1s again at the close of the year to the buying shareholder, the new shareholder.I guess you can contact the Dept of Rev of your state for more info in detail.