The two married shareholders live in a community property state.
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Under IRS regulations, disproportionate S Corp distributions are viewed as having a second class of stock. One of the requirements of an S corporation is that it only can have one class of stock. This, a disproportionate distribution can void your S corporation election, and potentially put you as a C corporation taxed at a corporate rate.
Under IRS regulations, disproportionate S Corp distributions are viewed as having a second class of stock. One of the requirements of an S corporation is that it only can have one class of stock. This, a disproportionate distribution can void your S corporation election, and potentially put you as a C corporation taxed at a corporate rate.
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