Originally Posted by cheezit
My S-corp owns some shares of a partnership (LLC). So I received some distribution and a K-1 from the LLC. All of the LLC's income comes from net capital gain. The k-1 shows some numbers on item 8 and 9a (Net capital gain) and some numbers on item 19 (Distribution). My question is where should I report the distribution on my 1020s. Should I report it as item 10 (other income) in schedule k or on schedule d (which item?)?
Thanks a lot.
I guess it depends;as the S corp is the member of the LLC partnership, then, the corp should be getting the Sch K-1. As you want the S-Corp to be the partner, the llc can transfer your interest in the LLC partnership to the S-Corp.
You were never the partner in LLC partnership, your S-Corp was. How an LLC owned by a S corp gets treated for tax purposes, however, varies depending on how the LLC is treated. For example, if the LLC is only owned by single S corp, the LLC is disregarded if it hasn't made an election to be treated as a corp. That "disregardization" means the LLC's income and deductions just get added to the S corp's other income and deductions. For all practical purposes, the LLC "disappears" as a taxable or tax reporting entity.
If an LLC is owned by several members and the LLC has not made an election to itself be treated as a corp, then the LLC is treated as a partnership. This means that the LLC will prepare and file a partnership tax return. Each of the partners or members in the LLC (including any S corp members) will receive a K-1 from the LLC partnership. And the K-1's income and deductions will be reported on the member's regular tax return.
If an LLC owned by an S corphas made an election to be treated as a corporation, the LLC files a corporation tax return. But the taxes on any LLC income get paid with that return. The S corp's accounting and taxes probably aren't affected by what's happening inside the "LLC taxed as a corporation." Essentially, the "LLC taxed as a corp" is just another "investment" owned by the "parent" corp.
So,An LLC owned by a single S corp could also be treated as a Qualified Subchapter S Subsidiary (also known as a QSUB) if the LLC and the member file the appropriate paperwork and if the LLC had prior to acquiring the S corp member been treated as an S corp. In this case, the QSUB's income and deductions just get reported on the "parent" S corpo's return on 1120S.