Been pulling my hair out so I decided to seek some insight before I go bald.

Here's the situation:

1. I own 100% of S-Co
2. I had no basis in S-Co at the beginning of '13. (actually negative basis)
3. S-Co had net income from operations of $30,000.

4. S-Co is a partner in a Partnership. It had no basis at beg of '13
5. S-Co contributed $2000 to the Partnership in '13
6. S-Co received $5145 in Partnership distributions in '13
7. S-Co sold interest in Partnership for $50,000.

Questions:

a. Is the 50k treated as S-corp income to me (K-1, line 16d ---> Sch E --->1040 Line 17) or do I account for this cap gain differently? (I'm hoping it flows thru to Sch D where I can offset the gain with a cap loss carry forward)

or

b. Do I net the partnership activities? (ie. 50k+5145-2000=$53,145) and treat all the money as S-corp income. (no differentiating between distributions vs cap gain)

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c. Assuming the same factors above....If the S-corp distributed more money than it's net profit, how is that accounted for?


Thank you sooooo much in advance. I hope all salient points have been properly provided.

pac

#1;no neg stock basis and unless you took losses in 2013, no neg bal in AAA either.


#2; Federal income tax laws impose corporate and partnership taxes on a corporation that is a partner in a partnership. The partnership must file a yearly informational tax return, F 1065, but it doesn’t pay income tax. Instead, the partner receives a Sch K-1 that reports his share of partnership's income and deductions. As a result, the corporation, which is a separate taxpayer, must report the partnership income, or loss, with the income it earns from other corporate activities and reports on a corporate tax return.

#3;I guess so

#4 Distributions are absolutely not an expense account. They are a reduction of the shareholder's capital account. it can be trated as cg aslongas it exceeds the sh/owner;s aaa/loan bases; If you take a distribution and that distribution brings your basis below zero, then the that amount over your basis is taxed as capital gains

Wnhough,

lol. thanks, but I'm a bit confused by your answers as it seems you provided answers to the surrounding factors not the questions. Can we narrowly stick to questions a, b & c?


a. Is the 50k treated as S-corp income to me (K-1, line 16d ---> Sch E --->1040 Line 17) or do I account for this cap gain differently? (I'm hoping it flows thru to Sch D where I can offset the gain with a cap loss carry forward)

or

b. Do I net the partnership activities? (ie. 50k+5145-2000=$53,145) and treat all the money as S-corp income. (no differentiating between distributions vs cap gain)

----------
c. Assuming the same factors above....If the S-corp distributed more money than it's net profit, how is that accounted for?
- I never mentioned it was accounted as an expense. If it's treated as a cap gn, do I document in Sched D?

a. Is the 50k treated as S-corp income to me (K-1, line 16d ---> Sch E --->1040 Line 17) or do I account for this cap gain differently? (I'm hoping it flows thru to Sch D where I can offset the gain with a cap loss carry forward)=================>>>as mentioned previously,as yousaid, as your s corp is a PARTNER in the PS, you the PS must report the 50K on 1065 and give you SchK1 of 1065 then,youmust report it on 1120S and SChk1 of 1120s.

or

b. Do I net the partnership activities? (ie. 50k+5145-2000=$53,145) and treat all the money as S-corp income. (no differentiating between distributions vs cap gain)===============>>>>>>>>>this is what I meant and you need to report it on your 1065 and 1120S.

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c. Assuming the same factors above....If the S-corp distributed more money than it's net profit, how is that accounted for?==as said, it is treated as LTCG;the amount over your basis in your S corp, I mean AAA/stock/loan basis, is taxed as CG.
- I never mentioned it was accounted as an expense. If it's treated as a cap gn, do I document in Sched D?==============>>>>>>>correct; you need to file sch D/f8949 NOTE; please contact a CPA/an IRS EA in your local area for more info in detail for your fed/state returns

okayyy...ummm, Let's try this again.

I am not the partnership. I understand that the partnership will send my S-corp a K1. The partnership hasn't provided the K1 yet. Can we set aside how the partnership is going to communicate the gain to my s-corp? That's not my question.

The question is how does my S-CORP report the transaction to it's shareholder, me? Is the 50k treated as S-corp INCOME to me (K-1, line 16d ---> Sch E --->1040 Line 17) or do I account for this as a CAPITAL GAIN and report it differently? (I'm hoping it flows thru to Sch D where I can offset the gain with a cap loss carry forward)

Let's just focus on this question. Can you be a bit more specific?

the partnership will send my S-corp a K1.=i did noT say the PS will SEND sch k1 to your S corp; you as a partner of the PS will receive SchK1 got it?????

thanks. I give up. you're providing answers to questions I don't have.