Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 11-12-2008, 04:03 PM
Junior Member
 
Join Date: Nov 2008
Posts: 2
Proportional S Corporation distributions

Is there any guidance out there for computing proportional S corporation distributions. Specifically, I have 3 shareholders. Mother & two children. The mother has been gifting shares to the children over the last few years. so the ownership % has been changing each year. There has been undistributed profits for each year and there has not been any distributions until this year. How do you compute a proportional distribution? Based on the current ownership % or a prior ownership % or an average?



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 11-19-2008, 09:49 AM
TaxGuru's Avatar
Tax Guru
 
Join Date: Jan 2007
Location: New Jersey, USA
Posts: 2,417
Blog Entries: 3
An S corporation generally is required to distribute the profit and loss that is reported on the K-1 based strictly on percentage ownership. The distribution is clearly based on actual amount withdrawal by the individual shareholder, however, I think what you really mean is how should the shareholder report their respective share of undistributed profits!

Since, the percentage ownership has been changing, the S corporations shareholders will report their distributive share of the profit based on the average percentage share of ownership during the year.

Thus the K-1 would reflect a distributive share of profit based on the average ownership percentage during current year, whereas, the distributions would reflect actual amounts by each shareholder.

__________________
Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.


Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #3 (permalink)  
Old 12-17-2008, 10:59 AM
Junior Member
 
Join Date: Nov 2008
Posts: 2
The K-1's that were issued in the past were based on the ownership %'s for that year. That is not the problem. The problem is that the profits for those years were never distributed. THe shareholders already paid the tax on the profits they just never received the cash. So now they want to distribute the cash. And I know there are strict rules that the amounts distributed have to be based on the ownership %. But as of when....when the profits were earned? the current ownership %? some average?



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #4 (permalink)  
Old 12-23-2008, 02:55 AM
TaxGuru's Avatar
Tax Guru
 
Join Date: Jan 2007
Location: New Jersey, USA
Posts: 2,417
Blog Entries: 3
For S corporations it is generally based on % of ownership and this % cannot change unless the partnership ownership % changes. The respective partners cannot base their distribution based on the amount of profit or loss incurred at a given time period. In this manner, the S corporation is generally inflexible in allocating profits or losses when compared to a partnership.

__________________
Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.


Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply



Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
What is the tax treatment for distributions for prior retained earnings? Leah S-Corporation 0 05-28-2008 04:20 PM
S Corporation Distributions maverick S-Corporation 1 01-04-2008 11:25 PM
How are my pension distributions taxed? gimini IRA/Sep 1 07-30-2007 03:50 PM
Taxes on Early Distributions from Retirement Plans Samatg General 0 02-21-2007 07:39 PM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning
 
 
 

» Recent Tax Q&A
No Threads to Display.