What forms/lines are used to document distribution of inventory to owner of an S-Corp upon closure of the business?

[whowerter]

I have entered a zero balance for ending inventory.  Not sure where to show that the inventory was distributed to the owner.  Are there multiple places where this needs to be documented?

[Rick19744 · Accepted solution]

This needs to be reported in two areas:

1. A distribution of property to a shareholder is deemed to have the same impact as if it were sold to the shareholder at FMV.  This income (or I suppose loss potentially since this is a liquidating distribution) is then reported on the 1120S return.
2. Liquidating distributions need to be reported on form 1099-DIV which has two boxes; one for cash liquidating distributions and one for noncash liquidating distributions.  This is reported to you at FMV on the 1099-DIV.
   

You then adjust your basis for the final year K-1 impact and then look at your liquidating distributions and determine your overall gain or loss which is reported on Sch D and the applicable 8949 on your 1040.