A client of mine has two S Corps, in which Corp A has taxable income of $ 280,000 but the non dividend distributions were $ 320,000. At year end the retained earnings is -$78,000. Would this result in a capital gain of $40,000 or $78,000?
Also, Corp B has a loss of $280,000, however Corp B owes the stockholder $1,900,000.The retained earnings in Corp B are (1, 350,000.)
Since this is a controlled group, is there still a Capital Gain from Corp A since Corp B owes him $1,900,000.