topic S-Corp Distributions in Business & farm

S-Corp Distributions

apenniman — Tue, 02 Jul 2019 20:20:05 GMT

My husband is a shareholder in an S-Corp. His 2018 schedule K showed a considerable sum for the S-corp distribution. However, we will not receive this money until the end of 2019.
Do we claim this in our 2018 taxes, or 2019?

Re: S-Corp Distributions

Anonymous_ — Tue, 02 Jul 2019 20:54:18 GMT

@apenniman wrote:
Do we claim this in our 2018 taxes, or 2019?

2018, provided the K-1 is for the 2018 calendar year (most likely) or a fiscal year ending in 2018.

Re: S-Corp Distributions

Anonymous — Tue, 02 Jul 2019 22:27:21 GMT

if k-1 is for calendar year 2018 or for fiscal year ending before 12/31/18 show on 2018 personal return. distributions are not taxable unless they exceed your basis in the S-Corp. Hopefully the S-corp provided a basis worksheet or you know it. if not, contact S-Corp to see if they can provide it. if not, seek advice of tax pro who can review situation. As I have stated, distributions are taxable to extent they exceed basis and if you don't know basis you don't know whether they are taxable. And if you don't know if they're taxable, you may be filing a return where you are underreporting your taxable income. By the way it was your responsibility to track your tax basis, not the S-Corp.

Re: S-Corp Distributions

Anonymous_ — Tue, 02 Jul 2019 23:29:59 GMT

We have a semantics issue here, apparently.

S corporation distributions are tax-free provided they are not distributions reported on a Schedule K-1 that represent ordinary income for the current tax year (and do not exceed basis otherwise). In that case, the K-1 income is reported on the recipient's income tax return whether there is an actual "distribution" or not.

Regardless, since reference has been made to a distribution (K-1 income) as a "considerable sum", I thought it might be worth mentioning that an S corporation is required to pay reasonable compensation to a shareholder-employee in return for services rendered to the corporation.