How do I record paid in capital to a S Corp of 20K and pay back to the share holder when a rental property is sold at a gain of 100K and will the 20K reduce the gain?

[MinhT · Accepted solution]

Paid in capital by a shareholder is not income. It is recorded on the balance sheet of the S-Corp as Paid in capital.

When the rental property is sold with a capital gain of $100k, the gain is reported as a capital gain on the S-Corp tax return. It is passed on to the shareholders through their respective Schedules K-1, each for their share of the gain.

The paid-in capital does not reduce the gain.