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posted Jun 4, 2019 6:58:45 PM

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

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?

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1 Best answer
Level 13
Jun 4, 2019 6:58:47 PM

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.

1 Replies
Level 13
Jun 4, 2019 6:58:47 PM

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.