A few follow-up comments:
- Question 2 - An S corporation is a pass-through entity. This means, in general, it is not subject to tax at the entity level. As such, all income, gain, loss, etc., is passed -through to the shareholder. Based on the limited facts, it appears that the business is generating income (profit) and this income is being used to build a building. If the S corporation generates income in 2022, then that income will be passed through to the shareholder and the shareholder will need to pay tax on that income. So effectively, the answer to your question is probably "yes"; you used the assumed profits to build an asset and did not distribute out cash to cover your potential income tax.
- Question 3 - you need to meet with a tax professional to make sure you understand how S corporations work. There are many nuances with an S corporation. You will need to track the accumulated adjustments account (AAA) and your tax basis and these figures will determine the tax impact of any distributions. Retained earnings in an S corporation environment have no impact on how distributions are taxed. As an S corporation the key components are whether there are sufficient AAA first and then the sufficiency of tax basis.
- In general, you will need to understand how to track your tax basis in your S corporation investment. This is a key for determining the tax impact of your pass-through items on your annual K-1 and eventual sale or disposition.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
