S Corp distribution are taxed as long term Capital Gains. They flow over to the 1040. I am confused it adds to the Total Income and flows down the 1040.======> a distribution of cash or property by an S corp may;the distribution may result in a tax-free reduction of the shareholder?s basis in the corporation?s stock; a taxable dividend, or Gain from the sale of the stock (generally resulting in capital gain).so what you mean is s corp distribution is taxed as a capital gain only when the distribution amt exceeds yur basis in the S corp. so I mean The tax consequences of distributions byyour S corp to you, a shareholder , depend on the shareholder?s basis in the S corp stock. Distributions to you are not included in your gross income to the extent that the distribution does not exceed the your basis in the stock
You , as a shareholder/employee in the S corp, are required to annually adjust your outside basis in the corp?s stock in order to reflect the items of income gain, loss, deduction and distribution allocated to you. These annual adjustments are necessary to preserve the single level of taxation afforded to S corps. Of utmost importance is the order in which these adjustments are required to be made. This is because while distributions reduce your AAA baqalnce/inside/outside basis, in many cases, it is your stock basis that will in turn determine the taxability of a distribution. However in reality, many are unaware of the necessity.
Does this mean that S-Corp Distributions get taxed LTCG + Fed Income Tax? Or some how the software just taxes it on LTCG and not Fed Income tax?====>>>>>>>>>>>>>>As mentioned above; it deepdns; you MUST pay tax on your S corp distribution oNLY when the amt exceeds your basis in the Sc corp.