Discussion:S Corp Distribution Exceeds Basis
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Discussion Forum Index --> Tax Questions --> S Corp Distribution Exceeds Basis
| 2 February 2006 | |
| S Corp Shareholders took distributions significantly above basis. Is this handled as follows:
1. Force the distributions on k-1s, and include note to K1 explaining? 2. Force Retained Earnings on Schedule L Balance Sheet? 3. Put the excess on individual 1040 Schedule D? Thanks for any guidance. | |
| 2 February 2006 | |
| If there are no accumulated e&p from when (if) it was ever a C corp, then all distributions are considered to be a return of basis in the shareholders stock, which would be non-taxable. Distributions in excess of this are capital gains. (Be careful of disproportionate distributions as these may be deemed another class of stock disqualifying S corp status.) I assume that there are no shareholder loans to offset with the distributions.
The capital gain would go on 1040 Sch D. The corp would also force Retained Earnings on Sch L for the distributions. Hope this helps. Bob Craig | |
| 7 February 2006 | |
| See similar question here: Discussion:Reporting distributions in excess of basis S corp. | |
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