Tagged: S corporations

Picture of Page 1 of Form 1120S.

Income Tax Effects of Inventory Distributions from an S Corporation

In this article, I will walk through the tax implications that result when a shareholder of an S Corporation withdraws inventory from the business for personal use. Because a withdrawal of inventory from the business by the shareholder represents a transfer of value from the business to the owner, we view this transaction as a shareholder distribution. The below analysis...

Picture of Page 1 of Form 1120S.

Does an S Corporation’s Credit Card Debt Increase Shareholders’ Basis?

Basis is an important concept for determining how a shareholder calculates the tax implications of many different situations and events related to their ownership in an S Corporation. There are two kinds of basis that a shareholder can have in an S Corporation: stock basis and debt basis. A common question related to shareholder basis is this: does a shareholder...

Picture of Page 1 of Form 1120S.

Are S-Corp Distributions Required to be Proportionate for all Shareholders?

Small business owners often wonder whether it’s acceptable to make disproportionate distributions to a shareholder of an S Corporation. The following example paints a picture of a situation where business owners may consider this possibility: Tom and Jeff own an S Corporation called TJ Engineering as equal shareholders (i.e. each shareholder owns 50% of the stock of the S Corporation)....

When is a Form 1125-E Required to be Completed and Attached to a Corporate Return?

SUMMARY Question When is a Form 1125-E Required to be Attached to a Corporate Return (Form 1120, 1120S, 1120-C, 1120-F, 1120-RIC, 1120-REIT)? Answer Form 1125-E must be completed and attached to the Form 1120, 1120S, etc. whenever the total receipts of the Corporation exceeds $500,000 during the tax year (see below for definitions of total receipts) Tax professionals and self-filing...