How to report S-Corp shareholder distribution on 1120S Schedule K-1?

[pencil123]

I'm a shareholder of an S-Corp. In 2020, the S-Corp distributed some money to me as owner drawing. In Form 1120S Schedule K-1 Box 16 - Items Affecting Shareholder's Basis, do I need to enter the amount of my S-Corp distribution? None of the Box 16 codes seem applicable.

Thanks a lot for your help!

[Rick19744]

While the 2020 instructions still appear to be in draft form, the coding for this item remains the same as that in 2019.  You will use code D on line 16 of the Schedule K-1.

[pencil123]

Thanks a lot, @Rick19744 ! I also contributed cash to the S-Corp in 2020, so should the amount for 1120S Schedule K-1 Box 16D be my net cash distribution (cash distributed - cash contributed)? 

I noticed that on my personal income tax return using TurboTax, entering the 1120S Schedule K-1 Box 16D amount reduces my Qualified Business Income deduction, dropping my QBI a lot lower than (S-Corp ordinary business income x 20%). Is there a reason for that? My distribution is an income distribution. It's not a dividend nor a capital gain, so I don't understand why it would have any affect on QBI.

Thanks for your help!

[Rick19744]

@pencil123 - No your distributions in box 16 code D should be gross distributions.

There are many factors in calculating the QBI and many of those factors are not provided in your facts. 

• Are you a specified service trade or business
• Wages paid to yourself
• Overall taxable income
• Etc

Additionally, this calculation is really outside the scope of being able to determine in a forum such as this.

The ordinary distribution should not impact your QBI calculation.  Take a look at the worksheets for this and also the form 8995.  Did you accidentally reflect this as a dividend somewhere? 

Also keep in mind that this is early in the season for software providers such as TT and, in general, not everything works as it should.  No question that this is not a new item, but sometimes things go awry.  Make sure you have the latest version.  Depending on what version you are using, you may be able to get technical support from a TT representative.

[Mike9241]

distributions have nothing to do with QBI.   all distributions from an S-Corp are treated as a reduction of the taxpayer's basis in the S-Corp (assuming it was always an S-Corp). if basis goes negative then the distribution is taxable as capital gain to the extent of negative capital.   the actual QBI deduction is not figured at the S-Corp level only at the individual's level because such factors as filing status, overall taxable income, whether S-Corp income is from a general business activity or a specified service activity, wages paid by the business and the business tax basis of qualified property.  in addition net capital gains and qualified dividends affect the computation.

the only items the S-Corp reports is its qualified business income

wages

basis in qualified property 

section 179 depreciation which is a separately stated item on the K-1 also reduces QBI at the individual level

[pencil123]

I see. Thank you very much for your help @Mike9241 @Rick19744 !