My attorney advised me to take the money I paid myself as a dividend. (I have an email out to her as well but wanted to see if I can understand things better as well.) The company is an S corp, has never been a C corp, but has paid dividends as late as 2004. This year, I hit this Note from Turbo Tax which I don't recall before:
Note: Many owners think of cash distributions as "dividends" but only S corporations that were once C corporations or acquired a C corporation could pay out a dividend.
An AI search on Duck Duck Go gives this:
An S corporation typically does not pay out dividends in the traditional sense; instead, it issues distributions to shareholders, which are generally tax-free up to the shareholder's stock basis. If distributions exceed the basis, the excess is taxed as capital gains.
I paid $1000 for the stock back in 1994. When I enter the amount into TurboTax, it now puts me into more screens that I've never seen before about Shareholder Stock and Debt Basis Limitations.
I'm fairly lost at this point.
