tax reporting for s corp distribution in excess of basis
Hello Linda,
Does S Corp distribution in excss of basis means that the shareholder is going to be double taxed ?
Example : S CORP opened 2009 Jan 1
SHareholder basis 0 $
Income to company 100 K
Expnses to company 90 K ( payroll , small businss rlated expenss )
Rmeianing cash 10 K
Oct 1 2009 - Distribution of 10 K
Dec 31 2009 - net profit 10K
So my distribution in Oct 2009 of 10 K , I will report in Sch K1 line 16 D - 10000 $
QUESTION IS How will I account this in 1040 ?
Will I report Businss income = 10K
and again report in Schedule D as Long Term Capital Gain ?
Am I going to be dpouble taxed ?
Would it be better if I wait till 2010 Jan 1st and take a distribution of 10 K in 2010 so that this wi;ll be treated as distribution within basis for 2010 ?
Please help
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With 100k in income and 90k
With 100k in income and 90k in expenses, you have ordinary income (profit) of 10k. If you take a distribution of 10k, then you do not have a capital gain to report as you have enough basis to take the distribution,
The 10k of income (profit) is reported on Schedule E page 2 of the Form 1040.
Hope this helps!