Discussion:S Corp Distribution Exceeds Basis

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Tax Questions --> S Corp Distribution Exceeds Basis

Mikef (talk|edits) said:

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.

Bobcraig (talk|edits) said:

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

Mikef (talk|edits) said:

3 February 2006
Thanks Bob. Do you know how it's handled on the K1?

Natalie (talk|edits) said:

7 February 2006
See similar question here: Discussion:Reporting distributions in excess of basis S corp.

To join in on this discussion, you must first log in.
Personal tools